The European Commission announced yesterday a detailed scrutiny of the planned merger between international accountancy giants KPMG and Ernst & Young, signalling that such a deal may create competition problems.

The EU executive last month began a similar probe of another merger between another two of the so-called Big Six accountancy firms, Price Waterhouse and Coopers & Lybrand.

If both deals go ahead, the number of major rivals in the sector would be cut to four, the other two being Arthur Andersen and Deloitte Touche Tohmatsui International. Today, the six audit most of the world's largest companies.