US Treasury panel weighs in on audit industry

By Rachelle Younglai

WASHINGTON, Oct 15 (Reuters) - Finding experienced accountants and boosting competition among audit firms are two main issues the profession faces, U.S. Treasury panelists said on Monday.

Lynn Turner, former chief accountant at the U.S. Securities and Exchange Commission, said there needed to be a way to help the smaller accounting firms. The landscape is dominated by PricewaterhouseCoopers [PWC.UL], Deloitte & Touche [DLTE.UL], Ernst & Young [ERNY.UL] and KPMG [KPMG.UL], which audit about 80 percent of all U.S. public companies.

Robert Steel, Treasury's undersecretary for domestic finance, also questioned whether there was enough competition and whether the accounting system reforms brought by the Sarbanes-Oxley law will produce the high quality audits and attract the talent needed.

They were speaking at the first meeting of 21 experts brought together by the Treasury Department to recommend ways to strengthen the auditing profession.

Recommendations are not necessarily geared toward changing Sarbanes-Oxley, implemented in 2002 after accounting scandals at Enron and other firms shattered investor confidence.

But critics have said some of the act's provisions are too burdensome and are driving foreign stock listings to other capital markets.

The panel is also examining the liability and insurance risks auditors face.

Auditors are seeking protection from disgruntled investors and companies who sue to recover lost capital. Auditors also say they have difficulty getting insurance because of the liability risks.

Robert Glauber, a lecturer at Harvard's Kennedy School of Government, said the potential for liability makes auditors "risk adverse."

The panel is part of a series of Treasury initiatives to boost the competitiveness of U.S. capital markets. It is separate from an advisory committee formed by the SEC to recommend ways to make financial reports easier to understand and prepare.

The Treasury panel is charged with coming up with recommendations by early summer 2008. The SEC panelists expect to come out with theirs by August 2008. (Reporting by Rachelle Younglai)