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By Huw Jones
LONDON (Reuters) - New European Union rules to improve auditing of banks and other companies are being blunted by varied implementation from nation to nation, a top accounting official said.
The reform forces companies to switch auditor every few years so that accountants are more likely to challenge what they are told before signing off on annual reports.
It comes after several lenders had to be rescued by taxpayers in the 2007-09 financial crisis just months after they were given a clean bill of health by accountants they had used for many decades.
Martin van Roekel, global chief executive of accounting firm BDO, said the reforms were giving more opportunities for medium sized accountants like BDO to lure customers away from the Big Four auditors -- PwC, KPMG, Deloitte and EY -- that dominate the sector globally.
However, various countries are applying different timescales to the mandatory switching because of a long phase in for the EU rules and flexibility over their implementation.
Van Roekel said this was complicating the auditor selection process for banks, insurers and other companies that have standalone operations in different countries.
"For banks and insurance companies it might become a complete nightmare," van Roekel told Reuters.
BDO said its revenues for the year that ended on Sept. 30 were up nearly nine percent at $7 billion (4.43 billion pounds) due to growth in China and 28 acquisitions in the past year, giving it a presence in 151 territories.
BDO and Grant Thornton, another mid-tier accounting firm, are still roughly only about a quarter or less the size of any of the Big Four, despite bulking up their annual revenues.
"We expect more consolidation. We expect it will go on for the next two to three years," van Roekel said.
The EU reforms are resulting in BDO being asked to tender for audit work that is normally rotated among the Big Four.
"However, when we look at the very big conglomerates, they are still heavily dominated by the Big Four and it will take years to see a wider diversity of audit firms," van Roekel said.
But the tendering for such top audits is opening the door to new tax and other advisory work, he said.
Mergers among accountants were being driven by customers having to look abroad for growth and needing an accounting firm that has offices across the world, he said.
The new EU rules and other reforms aimed at improving the quality of audits also means that accounting firms need deeper pockets to pay for IT upgrades, he said.
(Reporting by Huw Jones; Editing by Crispian Balmer)