A PYMNTS Company

UK: Regulator want UK to consider Big Four breakup

 |  March 19, 2018

UK regulators are encouraging an inquiry into whether the national market’s Big Four accountancy firms — KPMG, Deloitte, PwC and EY — should be broken up and forced to spin off their auditing arms, reports said.

    Get the Full Story

    Complete the form to unlock this article and enjoy unlimited free access to all PYMNTS content — no additional logins required.

    yesSubscribe to our daily newsletter, PYMNTS Today.

    By completing this form, you agree to receive marketing communications from PYMNTS and to the sharing of your information with our sponsor, if applicable, in accordance with our Privacy Policy and Terms and Conditions.

    According to The Guardian on Friday, March 16, the Financial Reporting Council’s (FRC) Chief Executive Stephen Haddrill is calling for an investigation into the industry and whether such a breakup would enhance competition and reduce conflicts of interest.

    “There is a loss of confidence in audit, and I think that the industry needs to address that urgently,” said Haddrill in a separate report in The Financial Times. “In some circles, there is a crisis of confidence.”

    A previous inquiry by the then-UK Competition Commission—now the Competition and Markets Authority—introduced stricter rules for the accountancy market, but Haddrill said the measures have done little to boost competition.

    “The Competition Commission introduced some remedies to try and encourage more competition,” he told the Financial Times. “But there is no more competition. So, it seems to me that we ought to have another look at [the audit market].”

    Several accounting scandals have recently made headlines in the UK, most recently with the collapse of government contractor Carillion, audited by KPMG. Previously, KPMG faced backlash over its failure to anticipate HBOS’ troubles amid the global financial crisis.

    Last year, PwC was fined US$6.5 million by the FRC after finding the auditor engaged in misconduct during its audit of Connaught. The regulator has also hit Deloitte with a fine of US$5.15 million related to its audit of Aero Inventory.

    Reports in the Financial Times last week covered new data from the International Forum of Independent Audit Regulators (IFIAR), which found widespread issues in the accounting market in the UK and beyond. According to the IFIAR’s report, 40% of the 918 audits it analyzed contained significant issues, most often related to independence and ethics.

    Most of the problems related to a failure among auditors to “assess the reasonableness of assumptions” or to “sufficiently test the accuracy and completeness of data or reports produced by management,” the report stated.

    Full Content: PYMNTS

    Want more news? Subscribe to CPI’s free daily newsletter for more headlines and updates on antitrust developments around the world.