Under fire accountancy watchdog to vet top appointments of big audit firms
Top level appointments made by firms that approve the accounts of the UK’s biggest companies are set to be scrutinised by the accountancy watchdog.
The Financial Reporting Council (FRC), which has been criticised for its handling of various investigations including the collapse of contractor Carillion, said PwC, KPMG, EY, Deloitte, Grant Thornton and BDO, which between them audit nearly all big company accounts in the UK, will now be subject to intervention by the FRC in the process of filling “key leadership and governance roles”.
The FRC said the move was to avoid “systematic deficiencies within firms’ networks, disruption in the provision of statutory audit services and instability in the financial sector”.
Melanie McLaren, executive director of audit and actuarial regulation at the FRC, said: “The work of the Big Six audit firms is core to the integrity and transparency of UK capital markets and so it is vital that the FRC introduces a new approach to monitoring their stability and performance by focusing on aspects of their businesses that are critical to the provision of high quality audit. We will discuss with firms how well candidates for key leadership and governance roles such as Independent Non-Executives, Heads of Audit and Ethics Partners meet our expectations in terms of experience, skills and attributes.
“Where we do not have specific powers in this regard we will look for the firms’ cooperation.”
The news comes a day after the FRC agreed to increase the fines it can impose on audit firms.
It now has the power to fine the Big Four firms – Deloitte, PwC, KPMG and EY – more than £10m for “seriously poor audit work”.
The highest fine levied by the FRC was £5.1m, imposed on PwC last August for its audit of fellow auditor RSM Tenon in 2011.
