The company, along with fellow Big Four members EY, KPMG and PwC, had been warned by watchdogs that their businesses needed to break off their profitable consultancy arms from audit divisions. The audit divisions don't always generate much in the way of profits, but concerns have arisen that the companies’ auditors have never properly challenged the directors on their accounts for fear of missing out on lucrative clientele.
On Friday (Sept. 11), Deloitte revealed it had set up an audit governance board to help to eventually separate the audit division from the rest of the company. The idea behind the reforms is to help improve book-checking and stop conflicts of interest.
The new rules mandate that, while companies do not have to sell their operations, they must be totally independent from other facets of their business. The split must be achieved by June of 2024, and companies will have to outline their plans for such a split by Oct. 23 of this year, The Telegraph reports. The new reforms come after accountants were chastised for failing to find red flags in controversies such as those of Carillion, BHS, Thomas Cook and Patisserie Valerie, according to The Telegraph.
Deloitte’s plans also come as it plans to look into selling its restructuring arm in spite of the surging demand for insolvency services. According to sources not named, executives believe the restructuring arm isn’t seen as a particularly lucrative venture.
The U.K. announced its plan to disentangle the groups’ various arms in July. The change wasn’t everything the harshest critics had asked for, namely that the accounting groups be completely removed from the corporate level. But the idea is that only audit work would go into profits for partners involved in running audits.