U.K. Financial Reporting Council orders Big Four to separate audit practices by 2024
The Financial Reporting Council (hereinafter the “FRC”) – the U.K.’s accounting and audit watchdog – on 6 July 2020 announced “Principles for Operational Separation” of the audit practices of the so-called “Big Four” firms.
The FRC listed 22 principles the “Big Four” – Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers – will have to comply with including an operational separation of their audit businesses. The objectives of these measures are to “ensure that audit practices are focused above all on delivery of high-quality audits in the public interest, and do not rely on persistent cross subsidy from the rest of the firm.” Under the principles, the “Big Four” will have to ringfence their audit practices and to ensure that audit partners spend the majority of their time on audits. The regulator said it aims to reduce potential conflicts of interest and boost the quality of audits in the U.K. as the country embarks on its future outside of the European Union.
The “Big Four” will have to submit to the FRC an implementation plan by 23 October 2020 and to adhere to the principles by 30 June 2024.