A white paper from the U.S. Chamber of Commerce says that the auditing industry is "severely contracted' and could eventually lead to complete erosion of public confidence in the market.

The chamber, which represents 3 million businesses and organizations, wrote that just one more major merger or scandal -- leading to the elimination of either PricewaterhouseCoopers, Deloitte & Touche, Ernst & Young or KPMG -- would be too much for the auditing field to bear. According to the Securities and Exchange Commission, the Big Four firms audit about 80 percent of public companies in the U.S.

The paper says that competition is the best way to prevent contraction and urged legislators and the SEC to revise rules preventing the Big Four from bidding for audit work when they have performed disqualifying services in prior years. The chamber also called for legal changes to give auditors better access to insurance and encourage public companies, underwriters and investors to find auditors outside the Big Four firms.

The chamber also criticized how Arthur Andersen was destroyed after the firm's indictment in the Enron accounting scandal; said that it would support giving auditing firms new protection against lawsuits through tort reform; and asked the Public Company Accounting Oversight Board to clarify its Auditing Standard No. 2, which provides instructions for how auditors should implement the Sarbanes-Oxley Act of 2002.

The paper is available at www.uschamber.com/publications/reports/0601auditing.htm .

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