Mario Christodoulou, Accountancy Age, Monday 18 October 2010 at 10:37:00

Big Four-only covenants likely to be discussed

A showdown has been planned for the UK?s top six accounting firms whenevidence is heard at a House of Lord?s inquiry into audit reform.

The House of Lords Economic Affairs Committee will take evidence from theheads of the Big Four ? PwC, Deloitte, KPMG and Ernst & Young ? followed bytheir mid-tier rivals ? BDO and Grant Thornton ? during its inquiry into auditcompetition.

The mid tier firms are expected to appear in two weeks, followed by Big Fourrepresentatives two weeks later.

Accountancy Age understand the firms will likely be asked about socalled ?Big Four-only? covenants, which force large companies to use only thetop four accounting firms.

These clauses, buried within the detail of large credit agreements, forcecompanies to select only Big Four auditors. The situation is seen as unfairlyfavouring the Big Four at the top end of the market, and stopping smaller firmsfrom competing.

The House of Lords also wants to speak with Treasury officials andrepresentatives from companies and investor groups before the inquiry concludes.The committee hopes to publish its full report just after Christmas.

Further Reading:

Lordsmay look into audit reform: McFall

Lordskick-off audit review tomorrow

Big-Four-onlyclauses are rare: BBA