The UK’s ‘‘big four” auditors are facing reform following the collapse of Carillion.
A report by the Competition and Markets Authority (CMA) has proposed a number of changes to the country’s auditing process, following failures of big firms such as Carillion.
Among its recommendations, the CMA said that work by the big four auditors PwC, KPMG, EY and Deloitte should be cross-checked by smaller rivals following a number of accounting scandals.
The report also recommends removing conflict of interest through splitting audit and more lucrative advisory businesses within the big four.
The Insolvency Service, Financial Reporting Council and Financial Conduct Authority have all opened investigations into Carillion, looking at the possibility of insider trading, and the role of Carillion’s auditor KPMG.
Earlier this year, Global Infrastructure Anti-Corruption Centre director Neill Stansbury said that Carillion was a “great example” of corruption within the UK construction industry, urging the government, engineering institutions and construction companies to “do more” to fight illegal and underhand practices.
CMA chairman Andrew Tyrie said that adoption of its recommendations would reinstall trust in the nation’s auditing process.
“Most people will never read an auditor’s opinion on a company’s accounts,” he said.
“But tens of millions of people depend on robust and high-quality audits. If a company’s books aren’t properly examined, people’s jobs, pensions or savings can be at risk.”
A separate review, carried out by Legal & General chairman Sir John Kingman has focused its attention on the auditing watchdog saying that the Financial Reporting Council should be scrapped.
In its place, Kingman recommends a new body is set up with greater powers.
Like what you’ve read? To receive New Civil Engineer’s daily and weekly newsletters click here.