Big Four accountancy firms consider judicial review to thwart audit industry reform
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The Competition and Markets Authority’s (CMA) recent intervention following an outcry over conflicts of interest in the wake of a string of scandals involving Deloitte, EY, PwC and KPMG may be challenged in the courts by the so-called Big Four accountancy firms.
Citing a “senior accounting source”, The Times reports that some of the firms are considering plans to seek a judicial review of the competition watchdog’s recommendations for overhauling the industry.
In spite of calls in the wake of scandals at BHS and Carillion for the Big Four accountancy firms to be broken up, the CMA instead ordered the firms to keep their auditing and consultancy services separate - a move known as “operational separation”.
This would mean audit chiefs do not get a share of profits from consulting and must answer to their own distinct board.
Despite claims that the CMA watered down its reforms in the face of industry pressure, the Big Four are understood to be taking advice from law firms on whether they could challenge the CMA’s final report on auditing, which was handed to ministers this month for a government response within three months.
As well as “operational separation”, the CMA is also pushing to enforce joint audits on FTSE 350 companies and has recommended tighter regulation of companies’ audit committees.
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