UK Audit Reform: Proposal Aims to Reduce Influence of Big 4 Audit Firms
A few weeks ago, I blogged about the Center for Audit Quality and AICPA’s roadmap to help auditors provide ESG data assurance services to companies. So, while Big 4 audit firms potentially ramp up ESG data assurance service offerings, over the UK there was big news last week when the government proposed to breakup the dominance of the Big 4. The proposal comes in response to large company collapses, such as Carillion and Thomas Cook, and aims to restore confidence in businesses.
A BBC story says there’s a 16-week consultation period to consider the proposal, which would require large companies to engage smaller audit firms to conduct part of their annual audits. Among other things, audit firms would be required to make their audits more rigorous, and they could be capped in terms of the number of FTSE 350 companies each firm could audit. The latest proposal follows last year’s attempt by the FRC, the UK audit regulator, to shakeup the accounting industry by separating audit functions from other operations, which an FT article says the accounting firms supported.
Still not all are optimistic the latest proposal will result in meaningful change. For one observation on past attempts, along with commentary on this most recent proposal, check out Francine McKenna’s take in her entry on The Dig titled “UK audit reform proposals: Full of sound and fury but likely to amount to nothing.”
-Lynn Jokela, TheCorporateCounsel.net March 24, 2021
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