Following Andersen’s decision to pull out of the audit business by the end of August, around 1,500 client companies will be seeking new auditors. The Big Four are set to absorb most of these, along with Andersen’s US personnel, who are likely to come running. Andersen’s global network of partnerships has already been divided up amongst the company’s rivals.
However, experts have noted that the added caution and rigorous oversight in the aftermath of Andersen’s conviction and the Enron affair is likely to translate into higher fees. Audits are likely to become more complex, with greater attention paid to the accompanying documentation. This will lead to severe increases in the time involved, and thus the cost.
Despite the feared increase in fees, experts feel that the current turmoil in, and criticism of the industry will be productive, leading to better practice and improvement in audit quality. This is seen as essential in rebuilding the profession’s tarnished reputation and restoring lost investor confidence.
With regards to Andersen, the firm, reputation destroyed, announced the decision to cease auditing public companies in August within a few hours of being found guilty of obstruction of justice. This will pre-empt the likely outcome of sentencing in October, which analysts believe will be the loss of its license to audit listed firms.
