trending Market Intelligence /marketintelligence/en/news-insights/trending/k5kqzqfdtnlvmh6b-b6nna2 content esgSubNav
In This List

UK financial regulatory chief pushes for inquiry on 'big 4' breakup

Podcast

Street Talk Episode 87

Blog

A New Dawn for European Bank M&A Top 5 Trends

Blog

Insight Weekly: US banks' loan growth; record share buybacks; utility M&A outlook

Blog

Banking Essentials Newsletter 2021: December Edition


UK financial regulatory chief pushes for inquiry on 'big 4' breakup

The head of U.K.'s financial services regulator called for an inquiry into whether the so-called big four accounting firms should be broken up, citing a "crisis of confidence" in the industry, a dearth of competition and a string of recent scandals, the Financial Times reported.

Financial Reporting Council CEO Stephen Haddrill said the Competition and Markets Authority should investigate the case for "audit-only" firms to boost competition and reduce conflicts of interest in the sector. If taken up, a move toward audit-only firms could force the big four accounting firms — Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers — to spin off their U.K. audit arms into separate business units, the FT said.

Haddrill has finished three discussions with the Competition and Markets Authority about starting an investigation into the U.K. audit market, with further talks scheduled. He has also put forward possible reforms such as a ring-fencing of accounting firms' audit arms and capping the number of listed clients a firm can audit, the FT added.

The proposal follows a string of corporate accounting scandals, including the collapse of U.K. construction giant Carillion plc in January, which has increased calls for regulatory reform. KPMG signed off on Carillion's 2016 accounts in March 2017, four months before the company issued the first of three profit warnings, the FT reported.

"There is a loss of confidence in audit and I think that the industry needs to address that urgently," Haddrill was quoted as saying. "In some circles, there is a crisis of confidence."

Haddrill said U.K. and EU reforms have failed to reduce the dominance of the big four auditing firms and said the idea of audit-only firms, which the Financial Reporting Council was initially opposed to, "needs to be reconsidered."

The big four accounting firms audited all but nine of the U.K.'s 350 largest listed companies at the end of their latest financial years, the FT reported, citing data from investment advisory research firm Manifest.