The Hindu Business Line : Big worries about Big Four

A recent alert on AccountingWeb reads, `Big Four Firms Face Huge Potential Liability in Global Audits'. The story, viewed already 1,808 times on www.accountingweb.com, speaks of fears in the European Union (EU) of `the potential collapse of one of the Big Four accounting firms'.

And it refers to `a briefing document, prepared for members of the EU delegation meeting in Beijing with Chinese officials on accounting and auditing issues'.

The reference is to the delegation headed by the EU Commissioner for Internal Market and Services Charlie McCreevy, but it looks like the document is safely tucked away somewhere. Strangely, however, the worry finds mention on http://electrical.vol1-building-construction.info thus: `EU must `urgently' address fears of collapse of a big 4 accounting... '

The `more' tag on the page leads one to a filing by AFX News on www.forbes.com, dated May 18.

"The audit firms wish to have a limitation of their liability at least to acts for which they can be held directly responsible for.

There is a particular fear that the next corporate scandal would reduce the Big Four to Big Three," is a snatch from the document that Forbes cites.

What is of concern is that, over the last two decades, accounting firms have seen a series of mergers, and shrunken in numbers even as they grew in shape to cope with the size of their clients.

Demise of the accounting biggie Andersen happened, as you remember, not long ago, reducing the Big Five to four.

"The remaining four now argue that litigation could further reduce their numbers and are lobbying governments to limit the extent of their liability to claims lodged by disgruntled investors."

Therefore, the EU is said to be studying `the economic impact of liability regimes in EU member states'.

The AFX News story cites three disquieting instances, on the strength of earlier reports:

Deloitte: "Sued by a minority shareholder in China's Guangdong Kelon Electrical Holdings Co for failing to expose falsified accounts in its audits of the appliance maker," and as a consequence facing a review of its practices by China's securities regulator.

Ernst & Young: Accused by China's central bank recently of `releasing `ridiculous' data on the non-performing loans burden of the country's banking sector.' E&Y is reported to have later withdrawn the report, with apologies.

PricewaterhouseCoopers: "Reprimanded by the Ministry of Commerce for irregularities in its auditing of Chinese electronics manufacturer BOE Technology Group."

We haven't heard of similar anxieties in India, have we?

E&OE@TheHindu.co.in

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