Last week, the United Kingdom's Financial Reporting Council (FRC) sent a letter to the largest UK audit firms - Deloitte, Ernst & Young, KPMG, PricewaterhouseCoopers, BDO, Grant Thornton and Mazars, asking them to voluntarily separate the operations of their audit and consulting units to achieve greater audit quality and competition among firms. Information on the FRC's site was limited to the following:
According to the latest press reports, legislation does not appear to be imminent and in fact, an appetite among legislators to make sweeping changes may be diminishing. Thus, the FRC is urging firms to take it upon themselves to separate their audit and advisory practices, which would preclude future income-sharing among the separated practices.
Some firms have announced in recent months their intention to cease providing consulting services to their largest public audit clients. It's been reported that BDO is looking at plans to separate its audit and consulting business in the UK.
To date, the UK government has not made decisions on audit reform recommendations, which came from reviews by the Competition and Markets Authority, John Kingman and Donald Brydon. In a December speech, the Queen of England referred to audit reform as a priority.
Plans on audit reform in the UK, including plans for "ARGA" (Audit, Reporting and Governance Authority), the regulator that will replace the FRC, are expected in April 2020.
