The UK’s largest accountancy firms should be split into audit and non-audit businesses, according to recommendations from a Government committee.
The Big Four accountancy giants conduct 97% of large companies’ audits, while also supplying those companies with other accountancy services.
The Business, Energy and Industrial Strategy (BEIS) Committee published a report highlighting a potential conflict of interest between the audit and consultancy services offered.
It endorsed a previous proposal from the Competition and Markets Authority that an operational division between audit and non-audit services should be put in place.
But the BEIS took this proposal a step further, suggesting a full structural split would help detect fraud by increasing professional scepticism.
Rachel Reeves, chair of the BEIS Committee, said:
“The client relationship, and the conflicts of interest which abound, undermine the professional scepticism needed to deliver reliable, high-quality audits.
“Splitting audit from non-audit business would be a big step towards boosting the culture of challenge needed to deliver high-quality audits.”
The Confederation of British Industry (CBI) hit back at the Committee’s plan, arguing it “jumps the gun” with a quick solution rather than waiting for evidence.
Josh Hardie, deputy director-general of the CBI, said:
“Businesses are aware there are problems with the audit market and it is a tough challenge to fix them. High-profile corporate failures have rightly prompted searching questions.
“But the UK’s position as a stable, evidence-based country is under threat and rushing to simplistic measures, rather than following a clear, considered long-term approach, will damage our reputation further.”
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