"The problem is global in that [KPMG, Deloitte, PricewaterhouseCoopers and Ernst & Young] have global brands and structures built upon networks of local partnerships subject to national laws and regulations," asserts the FSA report. "Accordingly, individual regulators do not have the scope to regulate the whole firm, but must focus on the local part."

In an effort to address the issue, the U.K. government's Department of Trade and Industry (DTI) and industry's Financial Reporting Council (FRC) jointly commissioned an independent analysis of how the concentration of audit firms affects audit quality and efficient market. "Anecdotally, it appears that barriers to entry exist that prevent other companies from competing," explains a DTI spokesperson, who adds that corporate book-cooking scandals also spurred the study. "Situations that arose elsewhere in the world heightened concerns. Clearly, we need to understand both the audit environment and what would happen if a firm failed or exited the market as a result of corporate failure or criminal prosecution."

Based on interviews with major U.K. companies, auditors, audit committee chairmen and other interested stakeholders, and conducted by independent consultancy firm Oxera, the study results will be published in spring of 2006, she adds. "The findings will inform development of policy in terms of liability fraud and the responsibilities of directors as we go forward."