Accountancy firms set for further battle

The world's largest accountancy firms are heading for another showdown with the Securities and Exchange Commission despite resolving many of their differences over self-regulation.

The Public Oversight Board, an independent regulator set up by the largest accountancy practices, will next week present plans to the firms for reinforcing its powers after finalising its stance at an internal meeting on Tuesday.

The board wants a larger budget and staff, more regular and rigorous checks on the effectiveness and independence of the profession's audits and a veto on some appointments to professional bodies.

The firms are in favour of much of the detail of the changes, but there is still disagreement over whether the board's enhanced powers will be subject to a "sunset" review which could shut it down.

The board has offered a regular review process but its plan stops short of a sunset provision. In addition, there has not yet been an agreement on the body's new budget, which will be paid by the firms.

Mr Jim Copeland, Deloitte Touche Tohmatsu's chief executive, said he could not support the plans without agreement on those points.

However, the SEC, the US's chief financial regulator, is looking for a speedy resolution to the argument and will view disagreement next week as another sign of what it has termed a culture of arrogance at the top of the firms.

The SEC is already at war with some of the firms over its plan to prevent consultants of the firms offering services to audit clients on the grounds that the independence of audits could be jeopardised by a conflict of interests.

The SEC has threatened statutory regulation which may involve a new federal regulator operating in a similar way, for example, to the Federal Communications Commission or the Food and Drug Administration.

Some close to the negotiations say there has been agreement on allowing the board to oversee a more regular "peer review" process by which the practices check each other's compliance with audit rules. Peer review at the moment takes place every three years and is set to become an annual event.