European Union (EU) regulators have expressed concerns that any US government decision to prosecute the US business of KPMG, one of the big four accounting firms, could badly damage the already-concentrated audit market.

The regulators have stopped short of demanding that the US government refrain from bringing criminal charges against KPMG for past tax work but they do not want to see the number of big accounting firms falling to three.

Arthur Andersen, once the world's biggest accounting firm, collapsed after the US justice department brought criminal charges against its US partnership in 2002.

KPMG could suffer a similar fate if the department presses criminal charges against its US partnership over past sales of tax avoidance products to clients.

A decision is expected soon but the justice department and KPMG declined to comment.

KPMG, Deloitte, Ernst & Young and PwC dominate the auditing of multinational companies.

Since Andersen's demise, regulators have often expressed concerns about the high concentration of the audit market and the lack of choice big companies have.

European regulators accept they cannot interfere with the US justice department's decision on KPMG but they are concerned about the potential consequences.

An official at the European Commission said: "It was already an issue going down to four [\big accounting firms]\. Obviously, having only three would be an even bigger problem."

Some European regulators have relayed their concerns about the potential consequences of the KPMG case to their counterparts in the US.

Andersen's international network of accounting businesses disintegrated after the justice department pressed obstruction of justice charges against its US partnership, which had been auditor to Enron, the energy company that collapsed in 2001.

The justice department's investigation into KPMG's US business focuses on sales of tax avoidance products to clients between 1998 and 2002.

Last month KPMG admitted some former partners had engaged in unlawful conduct during that period. - (Financial Times Service)