LONDON (AFP) - Britain unveiled on Thursday (March 18) a drastic overhaul of its troubled accounting sector, with plans to break the dominance of the so-called Big Four accountancy giants.
The long-awaited shake-up comes amid mounting outcry over the Big Four - comprising Deloitte, EY, KPMG and PwC - following a series of scandals in recent years.
"Major new reforms to the UK's audit regime will aim to safeguard British jobs, avoid company failures and reinforce the UK's reputation as a world-leading destination for investment," the Department for Business, Energy and Industrial Strategy (BEIS) said as it launched an industry-wide consultation on its proposals.
The government wants to replace accounting regulator the Financial Reporting Council with a tough new body that has legal powers to raise quality and standards at both listed and large unlisted companies.
The Audit, Reporting and Governance Authority (ARGA) watchdog will also have the power to split the audit and non-audit functions of accountancy firms, in order to avoid conflicts of interest.
Large companies would be required to use a smaller "challenger" accountancy firm to conduct a "meaningful portion" of their annual audit, the statement added.
And the Big Four could also face a cap on their share of audits of Britain's top 350 listed companies if competition does not improve.
The overhaul follows a string of headline-grabbing company bankruptcies that sparked huge job losses and left the taxpayer dealing with the fallout.
Notable corporate insolvencies included department store BHS in 2016, construction firm Carillion in 2018, and tour operator Thomas Cook in 2019.
"When big companies go bust, the effects are felt far and wide with job losses and the British taxpayer picking up the tab," said business minister Kwasi Kwarteng.
"It's clear from large-scale collapses like Thomas Cook, Carillion and BHS that Britain's audit regime needs to be modernised with a package of sensible, proportionate reforms."
The sector has been blighted in recent years by a series of scandals, including EY-linked activities at disgraced German electronic payments group Wirecard.
EY faced fierce criticism for its role in the 2020 downfall of Wirecard - whose books it had been checking since 2009.
Former fintech darling Wirecard collapsed in June 2020 after it was forced to admit that 1.9 billion euros (S$3.05 billion) missing from its accounts did not exist.
Deloitte was meanwhile fined £15 million (S$28 million) last year for serious misconduct after UK regulators probed its audit of British software firm Autonomy ahead of a disastrous takeover by US tech giant Hewlett-Packard in 2011.
