The big four accountancy firms may be forced to pull out of auditing in the next 12 months because of tough new US rules on auditor independence and the risk of being sued when audited companies collapse.
The stark warning comes from Peter Wyman, the president of the Institute of Chartered Accountants in England & Wales.
Speaking this weekend to The Telegraph, Wyman said: “People are genuinely worried that there are now only four multinational audit firms.
“My worry is that four might become three or two, either because one or more is sued out of existence or because they decide the huge risks that now exist in auditing mean it is simply no longer worth remaining in the business.”
Accountants face the threat of potentially crippling lawsuits from banks and creditors of companies that have been driven into bankruptcy by alleged accounting scandals.
Although the accountants have liability insurance, their policies would not cover huge legal claims of several hundred million pounds. As a result, the personal wealth of the partners in the accountancy firms is at risk.
PricewaterhouseCoopers is thought to have narrowly avoided making a call on its partners when it paid an estimated £100m in 2001 to settle claims relating to the collapse of Barings, the investment bank.
The big four – PwC, Deloitte & Touche, Ernst & Young and KPMG – have been forced to re-evaluate their businesses in the wake of accounting scandals at Enron and WorldCom, and the collapse of Andersen, the former accountancy giant.
Earlier this month, PwC changed the wording of its standard audit opinion for company accounts in a bid to limit its liability.
Wyman's intervention comes just days before accounting reforms drawn up by the Securities and Exchange Commission, the US regulator, are due to become law on January 2.