Trend towards accounting transparency gathering pace

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The Independent Online
The trend for accountancy firms to match the openness required of their clients is gathering pace, with two practices due to announce full financial information next week.

Pannell Kerr Forster, a second-tier accountancy company, is making what it calls "proper disclosure" on Thursday next week, only a fews days after Ernst & Young publishes its long-promised results.

Both moves have come in the wake of KPMG's publication of such details as profits and partners' remuneration following last year's decision to incorporate its audit arm with the specific aim of giving partners greater protection against large law suits.

As partnerships, accountancy firms are not required to publish any financial information and the leading practices have until this year merely produced gross fee income figures every June.

Since KPMG's announcement, Stoy Hayward, another second-tier accountancy firm, and a law firm have produced figures.

But it is widely believed that it will become the norm in the years to come.

KPMG believes that this will be partly due to companies asking firms to follow his organisation's example and partly due to people within the firms seeing the commercial advantage in being more transparent.

Last month, KPMG published a report suggesting that 93 per cent of companies were in favour of the large accountancy firms disclosing their financial information, with 69 per cent saying that they wanted them to be audited in the same way as plcs.

An Ernst & Young spokeswoman explained that the firm's decision was part of "a general move towards greater openness".

But observers are seeing it as part of an effort to win support for the firm's likely decision to try to reduce its exposure to large negligence claims by taking advantage of the limited liability partnership legislation that it and fellow big six firm Price Waterhouse helped to develop.

Price Waterhouse - in common with other leading firms - has not yet made a commitment on disclosure and is believed to be awaiting details of the Jersey law's requirements.

All the firms are continuing to lobby Government ministers for a change in the law to prevent them and other professionals from being held fully liable for any loss even if they are only partly responsible.

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