Grant Thornton calls for scrutiny of rivals

The company, which employs 209 staff in Leeds and 83 in Sheffield, claims that financial markets would be thrown into chaos if KPMG, Deloitte, PwC or Ernst & Young were to fail.

In a submission to a House of Lords select committee on economic affairs, which is investigating the domination of the audit market, Grant Thornton called for regulatory invention.

The committee is exploring concerns that market domination by a small number of firms damages competition and reduces choice in the audit market as well as raising questions about the quality of audited accounts and possible conflicts of interest between the auditing and business consultancy roles of the so-called Big Four.

Grant Thornton wants the introduction of a body to oversee auditors and place limits on how many listed companies any one firm could audit in the UK.

Chief executive Scott Barnes said: "The current audit market structure is not viable in the long term, because the failure of another large firm would leave the market with too few firms and could lead to the exit of other firms.

"Market confidence would be significantly dented and the resulting market structure could create the further moral hazard that the remaining firms are perceived to be 'too big to fail'. This would reduce price competition and lessen the pressure to maintain audit quality."

The committee is also considering whether auditors should have done more ahead of the 2008 banking crisis to alert investors to the riskiness of bank assets.