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In May the 167-page Oxera report, Competition and Choice in the UK Audit Market, highlighted what everyone already knew - the Big Four dominate large listed company audits. It found there were formidable barriers to entry facing other firms, with reputation being an important driver of auditor choice. Ensuing arguments focused on whether the Big Four domination threatened audit quality, and what if anything should be done about it.

The Financial Reporting Council held a number of stakeholder meetings to discuss possible ways forward to encourage greater competition, but did not rule out the possibility of regulatory action if a market-led model failed to have any impact. The FRC then decided to set up a market participants group to sift through the 100 suggestions it had listed to stimulate change. The performance of the group will be monitored by sceptics as focus on the audit choice issues continues in 2007.

Following Gordon Brown's surprise announcement at the end of 2005, in January 2006 parliament passed legislation to withdraw the requirement for a mandatory operating and financial review. The same month the highly unimpressed Accounting Standards Board released its Reporting Statement 1, converting its previous standard on the OFR to non-mandatory best practice guidance. Then in February the Department of Trade and Industry widened its consultation on narrative reporting requirements - would it do another U-turn? Even the Big Four couldn't agree about whether the government should in fact reinstate the mandatory OFR. It didn't, but many companies decided to still publish OFRs nevertheless - almost half of large companies, according to a survey by Black Sun, a corporate reporting agency. Nevertheless, companies and their auditors were left feeling rather uncertain about the future common standard of narrative reporting that would develop.

With Sir David Tweedie signed up for another five years as chairman of the International Accounting Standards Board, listed companies continued grappling with some of the trickier aspects of International Financial Reporting Standards as they prepared their first IFRS-based accounts.

The Financial Reporting Review Panel had encouraging news, however, when it reported a good level of disclosure and compliance in the first interim reports prepared under IFRS. Nevertheless, in the summer the IASB bowed to pressure from users of its standards to slow the pace of change, promising that any new IFRSs or amendments under development would not be effective until 2009.

Work on major projects such as the IASB's conceptual framework gradually came to the fore. Joint projects with the US standard-setter also resulted in consultation on important issues such as performance reporting. However, concerns emerged during the year that even if large areas of the globe adopted IFRS, differences in local interpretations could diminish the benefits of a single set of standards. Meanwhile the UK's Accounting Standards Board continued to consult on its preferred approach to the convergence of UK GAAP and IFRS - a big bang adoption in future rather than a phased approach - and on the options for small and medium-sized companies.

In July troubled healthcare software group iSoft revealed it had started an investigation into accounting irregularities affecting revenue recognition under its former accounting policy in the years up to and including 30 April 2005. At the start of the year the company had issued profit warnings over delays in its NHS contracts. The Financial Services Authority launched its own investigation in August, followed soon after by the Accountancy Investigation and Discipline Board, which set out to investigate both iSoft and its former auditor, RSM Robson Rhodes.

Across the Atlantic, Enron hit the headlines again as the trials of its former chairman Kenneth Lay and CEO Jeff Skilling got underway. In March, former CFO Andrew Fastow endured four days of tough grilling in the witness box. He was not on trial, having already pleaded guilty to fraud and money laundering in 2004. In October he was sentenced to six years in prison.

UK accountants and businessmen grew anxious in 2006 over the threat of extradition to the US. In July UK investment bankers - the NatWest three - failed in their last-ditch attempt to avoid extradition to Houston, having been accused of defrauding their previous employer, NatWest, of £4m in a deal involving Enron. Ian Norris, the former chief executive of manufacturing group Morgan Crucible, was also fighting extradition to the US on price-fixing charges.

Meanwhile, over the summer, BetonSports' chief executive, David Carruthers, was arrested in the US on fraud and racketeering charges. British accountant Nigel Potter lost his appeal against his conviction in the US for attempted bribery.

The profession expressed strong concern during the year over the government's plans in the Company Law Reform Bill to introduce a new criminal offence of reckless auditing. Despite active lobbying, the government refused to back down. Meanwhile, despite relief that auditors' deep pockets would finally receive some protection in the form of limited liability, the Company Law Reform Bill again caused some consternation by introducing the potential for a liability cap rather than proportionate liability.

The issue also went international when in October the European Union announced it would outline policy options for capping auditor liability.

Meanwhile, money laundering regulations continued to create work for UK firms. In February there was good news, however, when accountants won an important change in money laundering law giving them the same status as lawyers in privileged circumstances.

There was plenty to occupy the profession's tax minds in 2006, not least the apparently massive threat to the public coffers posed by carousel fraud. Revenue & Customs announced plans to tackle the problem by using a reverse charge mechanism, making it the obligation of the purchaser to pay VAT (and reclaim it) - a change requiring EU permission.

Understanding tax legislation has long been a challenge, but this year saw excessive amounts of head scratching over the changes to the trust regime. After the Budget, experts feared that the proposed measures could be the end of trusts as an effective asset protection vehicle for UK-domiciled individuals. Particular concerns arose in connection with inheritance tax. Professional tax bodies set to work to try and achieve some amendments to the Finance Bill.

Meanwhile a change of heart brought some joy when Lord Carter revised his opinion about the new tax filing deadlines for self-assessment. He relaxed his initial proposals following a successful campaign by the profession in which nine representative bodies united to lobby for the rethink.

Concern over the Revenue's powers remained high during the year, not least fuelled by proposals that would give its investigators wide-ranging new powers. Historically, Customs had greater powers than the Revenue but post merger, tax professionals feared the worst - an extension of the greater powers to the Revenue's officers. Anxiety also continued over the increasing volumes of anti-avoidance rules, seen as moving the system away from underlying principles.

It was a year of change in the halls of the ICAEW. In June president-elect Graham Durgan suddenly stepped down amid conflict of interest concerns.

Controversy arose over Durgan's training company, Emile Woolf International, being awarded 'recommended supplier status' by the institute for ACA training in Russia and China. Incumbent president Ian Morris stepped into the breach, his tenure being extended by an extra six months.

In July ICAEW chief executive Eric Anstee announced his resignation after three years in the post. The hunt for his successor ended in October, when Michael Izza, the institute's chief operating officer, was awarded the job. Izza had joined the institute in 2002 and been Anstee's deputy since 2004.