View from City Road: Touche may have got off lightly

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The blacklist punishment meted out to Touche Ross by the Government is not particularly drastic or surprising, given that the 13 named individuals are at the wrong end of a rather large lawsuit from the Treasury over Barlow Clowes.

Indeed, senior people at Touche were arguing yesterday that the blacklist demonstrated that the Government did not regard the firm as the real villain of the piece; if it had, the punishment would have embraced much more of Touche's work.

Remember Arthur Andersen and the De Lorean affair? The firm confirmed yesterday that it had not had any UK government department audit work since, even though it is still not aware of any formal blacklist all these years later. Indeed, many rivals believe Andersen Consulting was set up as a separate entity so it could distance itself from the audit practice's De Lorean problems (though officially the firm denies that was the reason). By comparison, Touche may have got off lightly.

But before the occupants of the Daily Telegraph's old site in Fleet Street become too cheerful about the aftermath of Barlow Clowes, they should remember another precedent. Arthur Young was the auditor of the ill-fated Johnson Matthey Bankers, whose collapse provoked the Bank of England to sue. The shock of the legal action, rather than the pounds 25m cost of the eventual settlement, pushed the Arthur Young partners into the arms of Ernst & Whinney to form Ernst & Young. JMB was, if you like, the last straw for a firm that had been weakening for some time.

Touche is not yet in Arthur Young's position. Indeed, as liquidator of BCCI it is possible that it will one day come to be seen as a prophet of doom for its rivals, what with those billions of dollars in lawsuits against Price Waterhouse and, to a lesser extent, Ernst & Young, the bank's former auditors.

However, the worst problem for Touche is not so much the potential cost - if any - of the Barlow Clowes litigation, or the blacklist. The worst risk is that bad publicity begins to tip the firm off short lists for private sector auditing work.