No Risk From U.S. Accounting Firm Concentration, Says GAO Report   

Jan. 10, 2008 -- A report issued on January 9 by the U.S. General Accountability Office (GAO) concludes that there's no "compelling need" to limit legal damages for audit firms or for regulators to focus enforcement actions on individuals instead of companies.

Findings in the GAO report are based on a survey of 600 companies as well as the employees of the Big Four and smaller accounting firms.

In brief, the GAO report concludes (we have put in bullet format with highlighting for emphasis):

• “Academics and business groups have put forth proposals to reduce audit market concentration and address challenges facing smaller accounting firms, including capping auditors’ liability and creating an office to share technical expertise. "
• "Market participants raised questions about the overall effectiveness, feasibility, and benefit of these proposals, and none were widely supported..."
•  “In light of limited evidence that the currently concentrated market for large public company audits has created significant adverse impact and the general lack of any proposals that were clearly seen as effective in addressing the risks of concentration or challenges facing smaller firms without serious drawbacks, we found no compelling need to take action."
• "As a result, this report does not include any recommendations.”

The GAO report will be further studied by the U.S. Treasury Department's Advisory Committee on the Auditing Profession (ACAP), established by Treasury Secretary Henry M. Paulson, before it releases its report by the end of the year. ACAP is co-chaired by former Securities and Exchange Commission (SEC) chairman Arthur Levitt, Jr. and former SEC chief accountant Donald Nicolaisen.

Read the full GAO report here; GAO has also posted a one page summary of Highlights.