Having reviewed and discussed the implementation plans originally submitted by the businesses on 23 October 2020, the body claimed it is “now content for the firms to move to the next stage of implementation”.
The move intends to ensure that the audit practices are focused on high-quality audits in the public interest, rather than relying on persistent cross subsidy from the rest of the firm.
While it has given the green light for progression, the FRC has noted three principal changes in addition to the proposed plans submitted by the Big Four firms:
- To clarify that services provided to non-audited entities should be commissioned by those charged with governance at the entity or be assurance services for third party recipients.
- To increase the minimum proportion of revenue within the ring-fence that must be derived from audit.
- To confirm that the audit practice should not receive fees for introducing business to other parts of the firm and that partners in the audit practice should not be incentivized for sales passed to other parts of the firm.
The advance follows the recent sale of Deloitte’s restructuring arm to Teneo, a US-based public relations and corporate advisory group.
Moreover, there has been a rise in reports regarding the increasing amount of interest gathering from bidders for KPMG’s insolvency business.