MPs call for five-year rotation of auditors

Companies should be forced to rotate their auditors every five years after a mandatory re-tendering process in an attempt to prevent an Enron-style crisis in the UK, an influential cross-party committee of MPs said yesterday.

The Commons' Treasury Select Committee also insisted the "Big Four" firms of accountants should face a major investigation by the Competition Commission.

Since the collapse of Andersen in the wake of the Enron scandal, only four global auditing companies remain – KPMG, Deloitte & Touche, PricewaterhouseCoopers and Ernst & Young – raising fears there is not enough competition within the profession.

"We recommend that the Government refer the UK operations of the 'Big Four' to the Competition Commission," the MPs said in a report that concluded a lengthy inquiry.

The Government declined to comment, but an interim report from a joint review by the Treasury and Department of Trade and Industry published today may back rotation every seven years.

The review group is also considering proposals to bar auditors from doing consulting work for any company whose books they check.

The Institute of Chartered Accountants said a rotation of auditors could be "positively damaging" and urged the Government not to launch a fresh competition inquiry.

Peter Wyman, president of the ICA, warned that making companies put their auditing contract out for tender every five years would be used as an excuse to drive down fees.

He said the profession had been given a "clean bill of health" by the Office of Fair Trading 18 months ago when there were still five major global firms.

But the New Economics Foundation, which gave evidence to the committee, said the recommendations were the "minimum action" needed to check the current wave of corporate crises.