(Adds industry comment, details from press conference in
paragraphs 12, 13, 14)
WASHINGTON, Sept 26 A U.S. Treasury Department
panel failed to come up with substantive recommendations to
give accounting firms protection from lawsuits that threaten to
shut down their business.
Since accounting firm Arthur Andersen collapsed after it
was indicted for its dealings with Enron, auditing firms have
been lobbying for protection from lawsuits.
But the 21-member panel convened to improve the profession
could not reach consensus over whether the current system was
fair and rational, and whether auditors needed protection from
Until 1989 there were eight large international auditing
firms -- Arthur Andersen, Arthur Young & Co, Coopers &
Lybrand, Ernst & Whinney, Deloitte Haskins & Sells, Peat
Marwick Mitchell, Price Waterhouse and Touche Ross.
But the Arthur Andersen collapse and a series of mergers
have left the industry dominated by four major firms: Deloitte
& Touche [DLTE.UL], PricewaterhouseCoopers [PWC.UL], Ernst &
Young [ERNY.UL] and KPMG [KPMG.UL].
Collectively the Big Four audit 98 percent of U.S.
companies with annual revenues over $1 billion, according to
the U.S. government.
The Center for Audit Quality, which represents public
company auditors, urged policy makers to examine the issue of
The panel did come up with recommendations, which are not
binding, for areas that did not include auditor liability.
It suggested the industry come up with a way to preserve
and rehabilitate troubled public company auditing firms.
It also recommended that U.S. audit watchdog the Public
Company Accounting Oversight Board monitor potential sources of
"catastrophic risk at auditing firms to prevent reduced auditor
choice and significant market disruptions."
Other recommendations include creation of a national center
at the PCAOB to provide a forum for auditing firms and others
to share their fraud detection experiences.
One of the areas that generated a lot of discussion among
the auditing firms was a recommendation that they produce a
public annual report and file audited financial statements to
the PCAOB, committee co-chairs Donald Nicolaisen and Arthur
Levitt said during a press conference in New York.
"Don and I both in our letter voiced strong support for
the profession to present audited financial results to the
public, and I think in a very short period of time some of the
firms will do just that," Levitt said.
"Once one firm does it, the rest of them will do it," he
Improving the profession's reputation, boosting competition
among audit firms and ensuring schools are keeping up with the
latest market developments were some other recommendations.
The panel also recommended exploring whether it was
feasible to appoint independent members with full voting power
to company boards or advisory boards to improve governance and
Earlier on Friday, the panel approved the final set of
(Additional reporting by Caroline Humer in New York)
(Reporting by Rachelle Younglai, editing by Gerald E.