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The Financial Reporting Council (FRC) has written to the UK’s ‘Big Four’ accountancy firms urging them to push forward with plans to separate their audit and consultancy services.
The FRC has confirmed it set out the regulator’s expectations for operational separation to bring about “audit quality improvements and audit market resilience”.
The move comes after the Competition and Markets Authority (CMA) recommended the move to stop conflicts of interest at EY, KPMG, PwC and Deloitte last year.
According to Sky News, in the letter the FRC reportedly told the firms they must set up separate boards for the audit and consultancy work with the audit board having an independent chairman.
It also recommended that their audit boards should house a majority of independent directors. Sky News claims challenger firms including Grant Thornton, BDO and Mazaars also received the letter.
Claire Lindridge, the FRC’s director of audit firm monitoring and supervision (AFMAS), said:
“The FRC’s focus is to ensure audit firms put audit quality front and centre, with new independence and financial transparency guidelines to support this.
“We expect the firms to put in place independent governance for the audit practice and ensure that the audit practice Is appropriately ring fenced from the rest of the firm so that financial results are clear and transparent.”
