Audit clampdown 'to hit small firms'

Accountancy firms yesterday warned that proposals to stamp out conflicts of interest by auditors could be expensive and " very onerous" for small companies.

The criticism came after the Auditing Practices Board, established as an independent body to police the industry, set out guidelines which would curtail companies' ability to offer lucrative tax, corporate finance and other advisory services to audit clients.

Publishing its consultation paper yesterday, the board said firms should not be allowed to audit companies to which they have offered large amounts of IT advice.

Another scenario in which firms would be banned from carrying out audit work would include cases where the value of their consultation work was so high that it would be very difficult to take an independent stance.

The proposals, which are available for consultation until March, are the UK's response to the Enron and WorldCom scandals in the United States. Those events shook investors' confidence in business practices in general and specifically in accountancy firms.

Ernst & Young, one of Britain's biggest accountancy practitioners, said some of the proposals could be "very onerous" because it could mean companies have to use a number of accountancy firms to service different needs.

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