EUobserver / EU audit reform reduced to 'paper tiger'
EUobserver / EU audit reform reduced to 'paper tiger'
Berlin - The EU is close to overhauling
rules for financial auditors, but critics say the reform will be a
paper tiger unable to break up the dominant position of the world's four
biggest audit firms.
In
Spain, KPMG acted both as advisor and 'independent arbiter' for Bankia
in a dispute with angry depositors (Photo: Line Orstavik)
The legal affairs committee of the European Parliament on Tuesday (21
January) approved a draft agreement struck late last year with member
states and the European Commission on the so-called audit reform
package.
Its proponents are saying that the new rules will weaken the
dominance of the "Big Four" audit firms: PriceWaterhouseCoopers (PwC),
Deloitte, Ernst&Young and KPMG.
All four are multinationals comprising of a myriad smaller national
firms who are - in theory - independent of each other and in competition
with the other rival names.
But among the four names, as practice has shown, there is no real
competition, as they often work together or subcontract to and from one
another - for instance, in the case of the Spanish bank bailout, when
all four were hired by the Central Bank of Spain for a total of €19.1 million to assess the value of local banks' credit portfolios.
In addition, failure by the Big Four to properly audit and scrutinise
US investment banks in the run-up to the 2008 financial crisis has
raised questions about their real motivation: to reveal problems in
their clients' books, or to keep lucrative contracts going?
