Tied firms stand strong in face of audit examination

INVESTIGATION: DTI to probe links with non-audit services

Lawyers at City law firms tied to the big accountants this week expressed confidence that their relationships would be given the green light after the Department of Trade and Industry announced plans to scrutinise the link between audit and non-audit work.

In the wake of the Enron and Worldcom scandals, trade secretary Patricia Hewitt said in Parliament last week that there should be stronger safeguards for auditing firms providing non-audit services.

The extent to which the announcement may impact on tied law firms remains unclear.

But Chris Arnheim, founder of Landwell - the firm associated with PricewaterhouseCoopers (PwC) - said: 'Our view is that they are going to be looking at tied law firms and we welcome that, because nothing we do affects the way that PwC carries out its audits.'

He said: 'The relevant question is whether the benefits that PwC and Landwell obtain from their relationship could impair PwC's audit independence.

We are quite happy that this is not the case.'

Mr Arnheim said that in comparison to audit regulation in the US and Europe, the DTI is taking a much more measured approach, 'looking at the substance, rather than the form of relationships'.

Nick Holt, managing partner of KLegal, KPMG's affiliated law firm, said: 'I'm happy for them to examine the relationship.

It is for the market place to decide how it wants services to be provided, rather than regulators.

But even if the worst came to the worst and the links had to be cut, KLegal could survive without giving advice to KPMG clients.

We are not structured solely to deliver that function.'

Mr Arnheim said he hoped the DTI would be looking at how independent the auditors are 'in fact, rather than from a theoretic point of view'.

Jeremy Fleming