Big Four facing break up after audit scandals

BrItaIn’S Big Four accountants could be broken up by the competition watchdog after it launched a review of the auditing sector.

the Competition and Markets authority (CMa) said it was probing the embattled industry amid widespread concern that poor-quality audits were putting companies, savings and pensions at risk.

Its move comes after a string of scandals, including the collapse of retailer BHS and outsourcer Carillion.

the Big Four – Deloitte, ernst & young, kPMG and PricewaterhouseCoopers – audit 98pc of FtSe350 companies but have been criticised for failing to spot warning signs at doomed firms.

a report by MPs accused them of ‘feasting’ on Carillion in the months before it went bust, hoovering up millions of pounds in fees.

the CMa’s review dramatically raises the stakes for the firms at a time when the Financial reporting Council (FrC) is already bearing down on lucrative consulting work.

In a separate review for the Government, the performance of the FrC itself is also under scrutiny.

yesterday the CMa warned it would consider all options if it found the auditing market was not working properly, with critics demanding the separation of the Big Four’s auditing divisions from their other businesses.

they claim this would prevent conflicts of interest which make auditors reluctant to challenge clients over fears of losing out on work. responding to the review, Bill Michael, chairman of kPMG Uk, said: ‘I have been honest that the industry faces challenges.

Personally I believe we all want to build trust in corporate Britain and be part of an environment that delivers the right results for capital markets, investors and society.’

kPMG was singled out recently by the FrC for an ‘unacceptable’ drop in the quality of its audits.

the accountancy group is the subject of five separate investigations by the regulator.