A clearing house for qualified auditors should be established by the Financial Reporting Council (FRC) as a safety net for corporate clients, should one of the Big Four firms drop out of the UK audit market.
Also, the FRC should swiftly introduce "direct regulatory intervention" to loosen the Big Four's stranglehold over the auditing of FTSE-350 companies.
The call for a clearing house comes from the Institute of Chartered Accountants of Scotland (ICAS) in a response to the interim report of the FRC's Market Participants' Group (MPG), which was issued in April.
The call for direct intervention came from Mazars, the leading auditor of global companies in Europe outside the Big Four.
The MPG was set up last October to examine the issues of competition and choice in the audit market for UK-listed companies.
Currently, 98% of FTSE-350 firms are audited by the Big Four, mainly down to many large companies privately believing that investors will be more impressed if their accounts are signed off by a large firm such as Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers, rather than a mid-tier player.
However, if one of those players were to suddenly exit the auditing field, it would result in, "a painful transitional process", according to David Wood, executive director, technical policy at ICAS.
According to Wood, since the demise of Andersen, many public listed companies have adapted their risk evaluation and planning to address the withdrawal of their auditor from the market.
He said: "However, the question remains whether that level of corporate response alone would be effective in the event of a major firm withdrawal or collapse.
"If Big Four becomes Big Three, we are looking at a huge amount of audit work to be soaked up by other firms. The corporate sector is gearing up to tackle the risks on a company-by-company basis, but the FRC should have a role to play as well.
"If we were to see another Arthur Andersen scenario, or even one of the Big Four simply going out of business, then in the short term there would be a lot of auditors on the street with nothing to do. And a lot of companies with no-one to audit their books.
"A framework should be created in which audit expertise and public entity audits can be married up smoothly. We envisage some kind of set procedure; like a clearing house for auditors, where clients can access their expertise."
Although ICAS favours a less regulatory path to reform, Mazars yesterday called for substantial regulatory reforms in its formal response to the MPG.
David Herbinet, a member of the MPG and head of public interest markets at Mazars, said his firm also believes that direct regulatory intervention may become necessary if the MPG's market-based initiative does not achieve results in a reasonable timeframe.
He said: "We must not shy away from the word competition': the bulk of available evidence points to a clear lack of it.
"When FTSE-100 auditors can expect to remain in place for 48 years, and 70% of those audits are not put out to tender in at least a 15-year period, this does not suggest a healthily competitive market able to offer real choice to end-users."
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