Black hole fears sweep markets

A WAVE of fear of the next accounting black hole swept markets as watchdogs pledged to investigate conflicts of interest in the profession.

Irish drugs developer Elan's market value crashed £2bn on fears that its 'joint ventures' were adding a rosy tinge to its finances. US conglomerates Tyco and Williams plunged on Wall Street.

Financing structures kept off the main balance sheet are under fire after Enron. Elan says it meets US accounting rules, but its shares crashed 680 3/4p to 1768 3/4p in London. Tyco slumped £6 to 2150p. It touched 4150p last month, when former Tory treasurer Lord Ashcroft sold 1m shares.

In a decade, Elan has soared into the world's top 20 drugs companies. The shares peaked at £44.47 last June.

The Wall Street Journal queried the realism of paying $20m into a joint venture and charging this to its balance sheet, but taking $15m back and treating this as revenue.

Elan rejected 'one-sided allegations' and said: 'We are completely compliant with US accounting standards. We also have £2bn cash.' Annual figures are due on Monday.

The market is showing no mercy on anyone suspected of accounting weakness. One London broker said: 'We are preparing a sell list. There could be more casualties.'

UK regulators are examining concerns that auditors are influenced by lucrative consulting contracts. The Accountancy Foundation, which oversees ethical standards, said: 'The issue of auditor independence is already on our agenda. We will follow the Enron inquiry closely.'

The Auditing Practices Board is also questioning the role of auditors. 'Much of our work touches on the problems that came to light at Enron,' said technical director Jon Grant. Enron sold its London metals arm to US-based Sempra Energy for £103m.