Michel Barnier has shocked the Big Four accounting firms. The European Union internal market commissioner wants to ban them from operating as consultants as well as auditors, force them to work jointly with others, and set time limits on how long they can audit each company.
It could be the biggest shake-up of accounting since the collapse of Enron laid low Arthur Andersen and led to the 2002 Sarbanes-Oxley Act. Yet it will not amount to much unless the industry’s looming disaster – the failure of another audit firm and contraction to a Big Three – can be avoided.
Making accountants perform better and ending the conflict of interest of auditors also acting as consultants and tax advisers are laudable aims. But if no way is found to break the Big Four oligopoly and return to a Big Five (preferably a medium-sized six or seven), then Mr Barnier’s proposals will be little more than crowd-pleasing gestures.