In a recent report, MPs have stated that the four big accountancies in the UK should be separated into audit and non-audit businesses to weaken their hold on an audit market that has been discredited by numerous corporate failures. The business, energy and industrial strategy committee said that the competition watchdog should consider the separation of the audit and consulting arms of KPMG, Deloitte, PwC and EY.
Report suggests separation into audit and non-audit branches
The report stated that a break-up would be more useful in ‘tackling conflicts of interest’ and providing the ‘professional scepticism’ required to deliver audits, according to the business, energy and industrial strategy (Beis) committee.
The four firms conduct 97 per cent of larger companies’ audits, and they also administer additional services. A review undertaken by the Competition and Markets Authority (CMA) has recommended a separation of the two functions, but it has been met with mixed responses.
MP Rachel Reeves, the Labour chair of the committee, pointed out that the report proposes various measures to raise competition and to improve auditing.
Three recommendations have been put forward for consideration
The CMA has put forward three recommendations, including a split between audit and advisory businesses and increased accountability for those appointing auditors. It has also suggested a joint audit system. The Business, Energy and Industrial Strategy (BEIS) Committee has backed these proposals, but it has said that a complete separation would be more ‘effective in tackling conflicts of interest.’
Accounting and finance is a complicated area of business, and there are various Cheltenham accountants who can assist with financial affairs. Individuals or businesses seeking help can visit or telephone accountants in Cheltenham, who will be pleased to organise a consultation. It also looks as though accounting could be heading digital. According to Accounting Today, artificial intelligence is set to transform the finance and accounting industries.
A British business lobby group, the Confederation of British Industry, has said that the MPs have been ‘heavy-handed’ about the issue and that moving swiftly towards ‘simplistic’ changes would hurt the UK’s reputation. PwC has also warned that severing the big four would weaken resilience and increase costs. It also pointed out that the UK’s global competitiveness would be damaged. PwC’s head of assurance, Hemione Hudson, said a break-up would reduce quality.