Leading auditors on alert as ethical standards consultation launched


Updated:

Leading accountancy firms have been warned over possible issues of independence as echoes appear of pre-Enron days where auditors earned far more from additional work for clients aside from the basic audit.

The Financial Reporting Council says the Big Four accountants - PwC, KPMG, Deloitte and Ernst & Young - should not be doing internal work for companies whose accounts they sign off.

FRC chief executive Paul Boyle has written to all four warning they 'may want to be cautious before entering into arrangements which stretch the internal/external audit boundary'.

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It has launched an ethical standards inquiry which is scrutinising the extent to which auditors sell advice to clients, and the resulting conflicts of interest which may arise.

Accountants using certain audit packages to win a client - such as KPMG did with Rentokil recently , providing services which would have been undertaken by Rentokil - was looked at by the Treasury Select Committee.

Once firms win clients, industry figures show they earn vast sums from additional work for the clients - and this is taking place less than ten years after a clampdown on such cosy relationships in the wake of the Enron scandal.

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