The Financial Services Authority, re gulator of financial service providers in the U.K., has expressed worries about the systemic risk that comes with the dominance of the Big Four accounting firms.

"There is now a potentially significant risk to international and domestic markets' market confidence that could crystallize were the collective reputation of the so-called 'Big Four' to be collectively impaired, or were there to be a major problem at one of the firms leading to a contraction to three," the FSA wrote in its annual International Regulatory Outlook, pointing to the recent difficulties of regulating the firms.

The FSA said that national regulators were frustrated that they do not have the scope to oversee the four firms -- while the firms all have international operations, they are built on networks of local partnerships subject to national laws and regulations -- oftentimes being forced to focus only on the activities of a firm's local arm.

The Department of Trade and Industry and the Financial Reporting Council recently commissioned a study of how concentration of audit firms affects the provision and quality of audit services. The Securities and Exchange Commission is also in the process of starting a three-year study of the same issues.Just last week, the Public Company Accounting Oversight Board announced that it had discovered major deficiencies in past audits done by Ernst & Young and PricewaterhouseCoopers. Last month, the PCAOB also issued reports for KPMG and Deloitte & Touche, which outlined a number of similar problems.

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