The Financial Reporting Council (FRC), the UK’s audit regulator, announced plans this week to break up the dominance of the largest four accounting firms, Deloitte, EY, KPMG, and PwC, according to the Financial Times.
The regulator issued letters to those firms, known as the Big Four. The plans, if put forth, would constitute a huge shake-up for the accounting industry in the UK, and would essentially ask for the firms’ audit and consulting operations to be separated.
The move comes in the wake of the competition watchdog’s recommendation in 2019 for the government to facilitate a split of those services. Several officials have voiced concerns in the past about the firms’ dominance of the accounting industry, as well as questions of conflicts of interest in various scandals that have rocked the industry.
The Big Four are under pressure after a series of high-profile auditing failures, including the falls of names like BHS, Carillion, and Thomas Cook. The firms are gearing up by storing hundreds of millions in preparation for fines that could come down on them.
But the government has not made any move to enact change, and the FRC is pressing the firms to break up of their own volition, so as to improve the quality of auditing. Under the proposal, the firms would make their audit operations fully independent businesses, with separate boards and independent chairs running them.
The FRC also stated there should be a ringfencing of audit costs and profits. The FRC stated partners in those businesses shouldn’t be remunerated any longer for the shared pool of earnings that encompasses firms’ consultants and tax advisors.
The FRC will give the firms time to comply with the proposals, but the regulator is due to be replaced with a stronger enforcement agency, the Audit Reporting and Governance Authority, which would likely have powers to break up the Big Four by force.
Claire Lindridge, director of audit firm monitoring and supervision at the FRC, said the regulator expected the firms to self-govern themselves and implement the recommended policies voluntarily. She said the goal was for audits to be “clear and transparent.”
Full Content: PYMNTS
Want more news? Subscribe to CPI’s free daily newsletter for more headlines and updates on antitrust developments around the world.
Featured News
CVS Health Explores Potential Breakup Amid Investor Pressure: Report
Oct 3, 2024 by
CPI
DirecTV Acquires Dish TV, Creating 20 Million-Subscriber Powerhouse
Oct 3, 2024 by
CPI
South Korea Fines Kakao Mobility $54.8 Million for Anti-Competitive Practices
Oct 3, 2024 by
CPI
Google Offers Settlement in India’s Antitrust Case Regarding Smart TVs
Oct 3, 2024 by
CPI
Attorney Challenges NCAA’s $2.78 Billion Settlement in Landmark Antitrust Cases
Oct 3, 2024 by
nhoch@pymnts.com
Antitrust Mix by CPI
Antitrust Chronicle® – Refusal to Deal
Sep 27, 2024 by
CPI
Antitrust’s Refusal-to-Deal Doctrine: The Emperor Has No Clothes
Sep 27, 2024 by
Erik Hovenkamp
Why All Antitrust Claims are Refusal to Deal Claims and What that Means for Policy
Sep 27, 2024 by
Ramsi Woodcock
The Aspen Misadventure
Sep 27, 2024 by
Roger Blair & Holly P. Stidham
Refusal to Deal in Antitrust Law: Evolving Jurisprudence and Business Justifications in the Align Technology Case
Sep 27, 2024 by
Timothy Hsieh