Sunday, 18 November, 2018

KPMG stops consultancy for audit clients

The KPMG offices at 15 Canada Square Canary Wharf Image KPMG earned roughly £1.5m annually as Carillion's auditor
Rhonda Young | 11 November, 2018, 02:37

"These concerns are not generally held elsewhere around the world, but given the United Kingdom environment we support a ban on all non-audit work by a firm to those FTSE 350 companies and large public interest entity private companies which it audits".

The move was disclosed in a briefing note circulated by Bill Michael, KPMG's United Kingdom chairman, to update the firm's partnership on its responses to two inquiries which have the potential to radically reshape the accountancy profession.

This puts pressure on KPMG's Big Four rivals, PWC, Deloitte and EY, and the smaller firms Grant Thornton and BDO to follow suit....

The CMA believes it is a problem the largest United Kingdom companies still turn "almost exclusively" to one of Deloitte, KPMG, E&Y and PwC when selecting an auditor.

The Competition and Markets Authority (CMA) has also launched a probe into whether the audit sector is "competitive and resilient enough to maintain high quality standards".

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A briefing note circulated by Bill Michael, KPMG's UK Chairman, confirmed that the move is part of a proactive stance from KPMG to head off "even the perception of a possible conflict", by discontinuing the provision of non-audit services such as consulting work for the FTSE-350 companies in question.

Two of the world's biggest accountancy firms have backed a ban on United Kingdom auditors selling extra services to their audit clients, setting the stage for a huge shift in the embattled sector.

In his memo KPMG's chair said the firm would push for the CMA to adopt its plans to split audit and non-audit only for FTSE 350 firms.

He said: "These proposals will be challenging for Deloitte and other market participants to deliver, but we believe this package of measures are most likely to address the concerns around choice and switching, long-term resilience and incentives", adding that the firm would "strongly oppose" any attempt to directly break-up the Big Four.

PwC said it was "open to embracing change" and recognised that further moves to limit non-audit services to audit clients "could be necessary".

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In its response, the Institute of Chartered Accountants for England and Wales (ICAEW) has suggested a cap of 60 per cent for the Big Four.

The accountancy firm KPMG will stop providing non-audit services to big listed companies whose finances they are inspecting after coming under intense pressure over perceived conflicts of interest. "The recent erosion of trust in our profession is also our problem to fix and I am determined that we take the right course of action to fix it".

Auditors review the accounts of firms to see if the figures are a true and fair reflection of companies' financial health.

But the accounting industry has faced a lot of criticism in the last few years over whether their verdicts on companies' accounts can be trusted.

Apart from the collapse of Carillion and the demise of BHS, a series of accounting scandals have focused regulatory attention on the sector.

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The FRC has also "enhanced" its audit firm monitoring programme, allowing it to levy penalties "that reflect the gravity of the issue".

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