Deloitte first Big Four firm to confirm audit split

Deloitte has announced its plans to establish an independent audit governance board (AGB), effective from January 2021, with the responsibility for providing oversight of its UK audit practice.

The decision is in response to demands from the Financial Reporting Council (FRC) for an operational separation of audit from the firm’s other business practices, and Deloitte is the first of the Big Four to establish such a structure.

The ABG is set to focus on policies and procedures for improving audit quality, and ensuring the FRC’s ‘‘desired outcomes for operational separation are met’’.

Baroness Ford, chair of STV and NewRiver Reit, has been appointed as independent non-executive chair of the AGB when it is established.

Ford said: ‘‘I am delighted to be joining Deloitte, one of the UK’s leading professional services firms, at what is a crucial time for the sector. It is clear that Deloitte recognises, and takes very seriously, its obligations around transparency, strong governance and the public interest, and I look forward to bringing my experience and insight to the firm.’’

Richard Houston, senior partner and chief executive of Deloitte UK, said: “We recognise the need to be more transparent about our audit business and demonstrate that audit quality remains our number one priority. 

“Our governance changes are an important part of this, and we welcome the diverse and extensive experience and independent rigour these high calibre individuals will bring to the AGB and our audit business.”

He added: ‘‘The AGB is central to Deloitte’s new governance framework and a key step in the operational separation of our audit business from our wider firm. We continue liaising with the FRC on the best ways to implement further changes to our governance and reporting structures.’’

Stephen Griggs, current Deputy CEO and managing partner for audit & assurance and public policy at Deloitte UK, said: ‘‘We’ve been consistent in our support for audit reform, and remain committed to playing our role in delivering change that embraces audit quality, improves choice and restores trust.

‘‘However, while governance changes to audit businesses are a key element of audit reform, they must also be considered alongside a wider package of change, including in areas such as corporate reporting, the role of directors, the evolution of the audit product and the regulatory environment in which we operate.’’

He added:  ‘‘Sweeping reform is needed if we are to better meet society’s needs and expectations of the audit profession in the years ahead.’’