Paulson set to target Big Four accountants

Hank Paulson, the US Treasury Secretary, put the idea of stimulating competition to the Big Four accounting firms on the political agenda yesterday, as he promised new efforts to reduce the regulatory burden on US companies.

In the latest signal that the White House is serious about clawing back ground New York has lost to London as a financial centre, Mr Paulson said the US needed to find ways to cut the costs of preparing quoted company accounts.

"We have been left with only four major accounting firms, each of which is exposed to potentially large legal liabilities," he said. "The situation forces us to ask questions about the industry's sustainability and effectiveness. Is there enough competition?"

The collapse of Arthur Anderson in 2002 - after the revelation of fraud at two of its biggest clients, WorldCom and Enron -- left PricewaterhouseCoopers, Deloitte, Ernst &Young and KPMG auditing the vast majority of large US companies.

The Sarbanes-Oxley legislation introduced in the wake of Enron's bankruptcy requires auditors to approve companies' internal financial controls as well as to certify the accuracy of their accounts, and the Big Four have been accused of an overly rigorous interpretation of the rules.

Mr Paulson said he would seek bipartisan agreement on new pro-business rules.

He set out the need to move closer to a UK-style "light touch" regulatory system. He also promised to work to reduce the number of regulatory bodies overseeing the capital markets. "Businesses and auditors are searching for something that doesn't exist in today's constantly changing world -- a rules-based safe haven."