(Adds industry comment, details from press conference in paragraphs 12, 13, 14)
WASHINGTON, Sept 26 (Reuters) - 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 class-action lawsuits.
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 auditor liability.
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 said.
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 transparency.
Earlier on Friday, the panel approved the final set of recommendations 14-1. (Additional reporting by Caroline Humer in New York) (Reporting by Rachelle Younglai, editing by Gerald E. McCormick)