While U.S. lawmakers were reaching agreement on tough accounting reform legislation, Patricia Hewitt, Britain's Secretary of State for Trade and Industry was outlining the U.K.'s slower, gentler approach to audit reforms.
The difference in approaches between the U.S. and U.K. seems to be rooted in the perceptions that U.K. accounting and auditing standards are superior in some respects to U.S. standards. There is also a feeling that the recent accounting scandals have been primarily an American phenomenon, even though British officials recognize the U.K. is not immune to accounting irregularities and the current crisis of confidence is affecting London as well as New York capital markets.
So far the controversy in the U.K. has centered around concerns about the small number of audit firms left standing after the Andersen meltdown rather than the need for oversight of the accounting profession. Most recently, a cross-party group of British politicians called for a probe of the Big Four accounting firms by the Competition Commission and a requirement that companies change auditors every five years.
Ms. Hewitt told Parliament her department would discuss with the U.K. Office of Fair Trading an investigation into "the competition implications of the high concentration in the market for audit and accountancy services." As in the U.S., the U.K. market is dominated by PricewaterhouseCoopers, KMPG, Deloitte & Touche and Ernst & Young.
Other tentative reforms, as summarized by AccountingWEB-UK, include a strengthening of corporate audit committees to include responsibility for both appointing the auditors and approving any non-audit work the auditor undertakes, mandatory audit rotation for all audit staff on a five-year basis, additional disclosures by companies of the value of non-audit work provided by their auditors, and a review of profession's regulation to look at criticisms that the British Accountancy Foundation is funded by the profession's main representative bodies.
The U.K expects to decide on specific new rules by the end of the year.