Accountants hunt for black holes

THE Big Four UK accountancy firms have embarked on a huge exercise to spot any black holes in their clients' books in the wake of the WorldCom and Enron scandals. They are targeting heavily-indebted companies and those where accounting concerns have been raised already.

The move, triggered not by regulators but by warnings from insurers, will add to nerves in the City which was already deep in gloom last night as markets slumped and new fears circulated about insurers' solvency, fast-growing companies' accounting techniques, and what the market slump itself might bring in write-offs and losses.

Top accounting sources say the Big Four - formerly the Big Five - are revisiting their recent audit records after indemnity insurers warned that they could be vulnerable to huge legal claims if any negligence surfaced. Partners could lose their houses and everything else, though some firms have tried to protect themselves by moving offshore,

PricewaterhouseCoopers said it is reassessing the risk profile of all its clients. 'We take a decision as to whether we continue working with that client.' It said this is 'normal practice at this time of year'.

The Big Four - KPMG, Deloitte, PricewaterhouseCoopers and Ernst & Young - would probably need some public action to pre-empt the Government which has launched a review of the profession. An interim report is due within weeks.

Peter Wyman, president of the Institute of Chartered Accountants in England and Wales, doubts there will be major changes. The ICAEW's own review, due in mid-September, is being fed into the Government probe.