[LONDON] Britain's"Big Four" accounting firms must ringfence auditing from their consultancy work, the country's competition watchdog said on Thursday in a response to book-keeping failures such as at construction company Carillion and retailer BHS.
Exemplifying the issue, regulators found PwC's lead auditor of BHS spent two hours on its 2014 audit and 31 hours on more lucrative non-audit work, leaving the bulk of auditing work to juniors. PwC was fined a record 6.5 million pounds for its shortcomings. The operational split should be reviewed by regulators after five years to see if tougher measures were needed, the CMA said.The audit practices of the Big Four should have their own management, accounts, pay policies, chief executive and board. Profit-sharing between audit and consultancy should be banned, and promotions and bonuses should be based on the quality of audits, the CMA said.
Regulators could allow"initial limited exceptions" to the joint audit rule for the biggest, most complex listed companies, the CMA said in a nod to a suggestion from lawmakers.
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