While Big Four firm KPMG was busy writing a check for $456 million as a settlement with federal regulators for its part in pushing fraudulent tax shelters, the remaining three global audit firms were either breathing a sigh of relief or wondering if they'll soon receive a request for a chat with prosecutors.Because KPMG avoided a criminal indictment like the one that ultimately proved fatal to now-defunct Big Five firm Arthur Andersen, my guess is you won't see a lemming-like exodus of audit clients like that at Andersen circa 2002.

True, the firm has to pay out a lot of money and have former Securities and Exchange Commission chair Richard Breeden monitor activities for a period of three years, but the glass half-full analogy is that it's still in business - although the structure of its tax practice will in all likelihood be modified. KPMG sold its now infamous shelters, which were packaged under acronyms such as BLIPS, OPIS and FLIPS, to hundreds of people during the period from 1996 to 2002, collecting $124 million in fees. According to a Senate subcommittee report, the shelters prevented the Treasury from realizing some $1.4 billion in tax revenues.

Additionally, KPMG benefited from an unusual show of altruistic solidarity by Ernst & Young, Deloitte and PricewaterhouseCoopers, all of which - unofficially, of course - pledged not to poach either clients or partners from KPMG. Now, my question is whether that strategy was born of concern for a troubled and reeling competitor, or a true fear of the vast repercussions should another global audit firm collapse.

My guess would be that it was a combination of both.

Should the field be narrowed to three global audit firms - a rather sobering thought, considering that seven years ago Accounting Today was covering the Big Six - the government would more than likely take a long, hard look at the remaining audit firms - several of which have already been slapped with mega-fines for audit violations. That's aside from the severe constriction of choice for the larger public clients should the auditor pool shrink by one.

But the concern over the current Big Four woes depends largely on where you stand - or, perhaps more accurately, where and with whom you do business.

The prime beneficiaries of the Sarbanes-Oxley Act's stringent client services prohibitions have been the national audit firms just under the Big Four, who have happily picked up clients that global firms have relinquished rather than risk audit violations. I'm sure those firms, and the burgeoning "super-regionals" just below them, have made no such promises not to lure away both clients and partners.

Despite paying out the mammoth fine - equal to about 11 percent of its 2004 U.S. net revenues - in three installments, KPMG's troubles are probably far from over.

Sure to ensue will be a boatload of civil lawsuits by tax shelter clients, as well as the indictments against the former KPMG partners who peddled the tax shelters.

Somehow relegated to a sidebar were the firm's well-documented problems at former audit clients such as Xerox, which will undoubtedly spark investor lawsuits. It also paid out $10 million to settle charges of an audit failure at Gemstar-TV Guide International.

Whatever. I, for one, hope that the Big Four remains, as the auditors are fond of saying, a "going concern." Any radical change to that audit chain hierarchy would and should be an overwhelming concern.

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