[ 2021-02-25 ]

Watchdog strengthens audit rules for KPMG, EY, Deloitte and PWC
London (UK) – 24 Feb 2021 – The Times -
Britain’s accounting watchdog has announced new
rules to separate further the audit and consulting
arms of the Big Four firms.

KPMG, EY, Deloitte and PWC are in the process of
building walls between their audit and advisory
teams on the orders of the Financial Reporting
Council (FRC).

The FRC announced the planned operational
separation of the firms in July. The measures,
which must be in place by June 2024, are aimed at
preventing a repeat of accounting scandals in
recent years at companies including Carillion and
Patisserie Valerie.

In a statement of principles last year, the
regulator said that firms should ensure “no
material, structural cross-subsidy persists
between the audit practice and the rest of the
firm”. Auditors should “act in the public
interest” and must work for the “benefit of
shareholders of audited entities and wider
society” rather than the executives who hired
them, it said.

In an update yesterday, the FRC said that the
audit divisions of the firms should not be paid
for introducing clients to the consulting
business. It also said that partners in the audit
practice should not be incentivised for sales
passed to other parts of the firm and revenue from
audit work should make up at least 75 per cent of
the revenue from the audit practice.

The Big Four all said they accepted the updated
principles.

Hywel Ball, UK chairman of EY, called on the
government to make progress on a wider package of
reforms, which are expected to be put forward in a
consultation this month. “It’s vital the
government maintains momentum on corporate
governance and audit reform to continue this
legacy and ensure the UK remains competitive and
attractive in this decade and beyond,” he said.

Source - The Times, UK

... go Back