LONDON (Reuters) – Britain’s accounting watchdog stated on Monday it might ban accounting companies from offering consultancy work to companies whose books they verify.
FILE PHOTO: A employee operates a crane on Carillion’s Midland Metropolitan Hospital building website in Smethwick, Britain January 29, 2018. REUTERS/Darren Staples/File Photo
Under strain from lawmakers to toughen up supervision of accountants after collapses at outsourcer Carillion and retailer BHS, the Financial Reporting Council introduced a brand new “strategic focus” to make sure that audit serves the general public curiosity higher.
The Big Four accountants, PwC, EY, Deloitte and KPMG typically present profitable consultancy work to the identical companies whose books they verify, elevating issues that accountants is probably not prepared to problem administration of these corporations.
“The review will include determining whether further actions are needed to prevent auditor independence being compromised, including whether all consulting work for bodies they audit should be banned,” the FRC stated in a press release.
The FRC will work intently with the Competition and Markets Authority (CMA) on this space, it stated.
Taking classes from current company failures, the FRC stated it’ll look to toughen up necessities for auditors to find out if a company is right in stating it’s a going concern, that means it has sufficient assets to proceed in operation for a 12 months or extra.
The evaluate will contemplate if accountants ought to say publicly in the event that they have doubts about “realism” in a company’s assertion on going concern, the FRC stated.
The government has already ordered an impartial evaluate of the FRC after it was described by lawmakers as timid in its dealing with of accounting companies.
The evaluate by John Kingman will report by later this 12 months and will suggest growing the FRC’s powers or a extra radical restructuring.
The CMA has already heard proposals from the UK accounting sector setting out short-term curbs on what number of massive listed corporations the Big Four can audit.
The proposals are aimed toward assembly lawmaker criticisms that the Big Four, who audit practically all blue chip corporations, don’t face sufficient competitors.