Lords to condemn Big Four's role in financial crisis

KPMG, PwC, Deloitte and Ernst & Young have offered to reform the way they operate ahead of what is expected to be a highly critical report on their role in the financial crisis and lack of competition in the sector.

This week the House of Lords Economic Affairs Committee is expected to publish a damning report on the sector, entitled Auditors: market concentration and their role.

It will raise serious questions about why the auditors gave leading banks clean bills of health months before the sector collapsed, the Telegraph reports.

The report will also say there is a lack of competition in the industry, with only 0.01% of auditing fees for FTSE 100 firms going to auditors outside the so called 'Big Four' accountancy firms.

Northern Rock, RBS, Lloyds Banking Group and a number of building societies needed tens of billions of pounds of tax-payer money when the highly-leveraged property market collapsed and wholesale funding between financial institutions dried up.

The Lords report is expected to focus on the term 'going concern' used by auditors to say that a corporation is in a position to meet its liabilities.

Auditors argued they were obliged to pass the banks as being 'going concerns' because to do otherwise would have put the banks at further financial risk.

Evidence given to the committee suggests the auditors had received assurances from the government that it would step in with funding if any banks went to the wall.

The firms have also pointed out that neither the Bank of England nor the FSA were warning of the credit crisis ahead.