The U.K.’s accounting regulator introduced fresh recommendations to put further distance between the Big Four accounting firms and their consulting arms ahead of their impending split.
The audit side of the firms’ business shouldn’t get paid for introducing customers to their consulting arms, the Financial Reporting Council said Tuesday in its latest update. Accounting partners shouldn’t be “incentivized” for sales passed to other parts of the firm and revenue from accounting work should make up at least 75 percent of the revenue from the audit practice, the FRC said.
PricewaterhouseCoopers, EY, KPMG and Deloitte have come in for criticism after a series of high-profile collapses of major U.K. companies. That prompted the FRC to announce it would force the Big Four to create an operational split between their accounting and consulting arms to eliminate potential conflicts of interest.
Those plans have been delayed by the coronavirus but the FRC said in Tuesday’s update that it still plans for the splits to be completed by mid 2024.
Hywel Ball, EY’s U.K. chairman, said in a statement that the firm is making “good progress” to its goal of operational separation and expects to have an audit board made up with a majority of independent members by July 1.
Deloitte said in a statement that it has had an independent audit governance board since Jan. 1 and believes the majority of changes to its business can be achieved ahead of the 2024 deadline.
A PwC spokesman referred to comments from October when the firm said it had created an audit oversight body and submitted other proposed changes to the regulator.
