Regulators Propose Sweeping Changes to U.K. Audit Industry

The U.K. government has sought to improve the reputation of the nation’s audit and accounting sector. Photo: Alberto Pezzali/NurPhoto/Zuma Press By Nina Trentmann April 17, 2019 7:01 p.m. ET

Newsletter Sign-up The CMA recommended an operational split of the Big Four’s audit work in the U.K., a change that would require the audit firm and the consulting business to have separate chief executives and boards, as well as separate financial statements. The change also would end profit-sharing between the companies’ audit and consultancy businesses, as well as ending promotions and bonuses that are based on the quality of audits.

The U.K. government has 90 days to respond to the CMA’s recommendations. “Legislation is needed to address both the vulnerability of the industry to the loss of one of the Big Four, and the current inadequate choice and competition,” the CMA said in a statement.Andrew Tyrie, chairman of the U.K.’s Competition and Markets Authority.

KPMG welcomed “many aspects of the CMA’s recommendation to introduce increased separation,” but said its auditors still needed access to the firm’s wider resources, including talent and technology.

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