* Lawmakers call for two auditors to check books
* Responding to attempts to water down reform
By Huw Jones
LONDON, Sept 18 (Reuters) - European Union lawmakers proposed on Tuesday that companies should have two auditors to check their books, beefing up proposals to boost competition and standards in the audit market.
The idea represents a significant addition to a draft EU law designed to improve the performance of auditors blamed for giving banks a clean bill of health just before they were rescued by taxpayers in the 2007-09 credit crunch.
The legislation is also intended to end the dominance of the so-called "Big Four" -- KPMG, PricewaterhouseCoopers, Ernst & Young, and Deloitte -- which audit most bluechip firms around the world.
But some of the smaller auditors in line for extra business doubt the plan will be supported by enough member states and believe a likelier outcome is a system of shared audits where the junior partner checks the books of a subsidiary.
Lawmakers from the assembly's two biggest parties, the centre right and socialists, said on Tuesday they backed joint audits for listed companies, meaning smaller auditors like Grant Thornton, BDO, Mazars or RSM would team up with a Big Four company to sign off accounts.
Antonio Masip Hidalgo, a Spanish centre-left member told parliament's legal affairs committee he would bring forward amendments to make the law "more reformist" by including joint audits.
Angelika Niebler, a German centre right member, backed his call, saying that in a market dominated by the Big Four, they must be "more courageous" to guarantee audit quality.
"I like this idea of joint auditing," Niebler added.
The two parties have more than enough votes to push through amendments but the final text needs the agreement of member states as well.
The lawmakers were responding to an attempt by the law's sponsor in parliament, Britsh Conservative Sajjad Karim, to water down the measure.
France has joint audits for top companies which bumps up auditing costs by 5 percent or more, according to industry estimates. Audits for a blue chip company can cost several million euros.
Smaller auditors argue that EU or UK regulatory intervention would improve the likelihood of more work and hence justify investment in more accountants.
Nick Jeffrey, a director at Grant Thornton, said the way companies hire auditors needs to change, which could create incentives to use more auditors.
But big auditors say joint or shared audits are difficult in practice.
"Joint or shared audits can create problems such as diluting accountability. Some companies are against it because it means more expense, disruption and possible squabbles among the auditors," David Cruickshank, chairman of Deloitte UK, told Reuters.
Smaller auditors say joint or shared audits would help them build up trust at blue chip clients which have hired the same Big Four auditor for decades.
The centre left and centre right blocs suggested they would also reject Karim's attempt to lengthen to 25 years from six the maximum period a company can use the same auditor.
Karim said he proposed such a long period because issues of unfair competition should be handled by competition authorities and not lawmakers.
Big Four officials say the anticipated rules will simply accelerate changes already underway as companies want to display good corporate governance by retendering more often.
"The market is already moving. The old state of keeping an auditor for 50 years is gone. Now it's all about how far and how soon to move," a senior Big Four official said.
Shorter tenures would push up fees due to less time to recover tender costs, and the top end of the market will not be lucrative enough for smaller auditors to expand, he said. Business may end up being redistributed among the Big Four.