The top US audit regulator on Tuesday said he had privately warned the Big Four accounting firms against thinking they are too big to fail, despite fears that corporate America will not be able to handle another Andersen-style meltdown.
The warning comes as the Public Company Accounting Oversight Board chief said evidence so far suggested the top accounting firms are preaching the right message internally after a tumultuous year for the industry.
Critics say the PCAOB, created following a spate of accounting scandals last year, faces the delicate task of cracking down on the accounting industry without triggering the downfall of another top audit firm. The Big Four together audit roughly 99 per cent of Fortune 500 companies.
'I have made it privately clear to the heads of the firms, I am not responsible for the continuing existence of any of the Big Four,' PCAOB chairman William McDonough told financial executives. 'Would it be inconvenient if one of the four firms managed itself sufficiently badly to be put out of business? You bet. Is it something that they're responsible for avoiding? Even more, you bet.'
PCAOB is conducting limited inspections of the Big Four this year before starting full-blown ones next year. Whether the small-scale checks will uncover anything noteworthy is yet unclear, but Mr McDonough said the board plans to publish a report in January detailing lessons learned from them.
