KPMG to reform UK structure amid scrutiny of Big Four auditors
Watchdogs have called for the Big Four accounting giants to separate their audit and consulting services following a number of major scandals.
KPMG has announced plans to restructure its auditing arm but fell short of separating it from the wider company despite pressure from watchdogs and MPs.
The move follows calls from the Competition and Markets Authority (CMA) for the Big Four accounting giants to separate their audit and consulting services following a number of major scandals.
KPMG will create a new audit executive committee in the UK to oversee the performance and risks of its audit business.
The move follows demands from the regulator to introduce a separate board and chief executive, but falls short of its broader call for an operational split.
Jon Holt, previously head of financial services, has been appointed as its new head of audit and will lead the new committee.
Michelle Hinchliffe, KPMG’s current head of audit, will join the firm’s UK board in the newly created role of chair of audit.
The big four accountancy firms, which also include PwC, Deloitte and EY, have faced scrutiny from regulators and MPs, as they look to improve accountability and transparency in the industry.
KPMG has been at the centre of a number of scandals recently, most notably auditing outsourcer Carillion, which collapsed last year despite receiving a clean bill of health from the firm.
It was also recently fined £5 million for failings in its 2009 audit of the Co-operative Bank and £6 million for its audit of insurer Equity Syndicate Management more than 10 years ago.
Bill Michael, chairman and senior partner at KPMG in the UK, said: “We’re serious about making changes to restore trust in audit.
“We understand concerns that the profession’s operating models have become too opaque and we are taking action to tackle these.
“The sole aim and focus of our chair of audit, our new audit executive and our audit oversight committee is to drive audit quality, via strong leadership, good governance, rigorous controls, independent decision-making and separate performance management from the rest of the firm.”
A CMA spokeswoman said: “The changes KMPG have announced are welcome but they do not address all of our concerns.
“The recommendations we made to government are designed to tackle deep-seated and serious competition concerns in the audit market, where conflicts of interest persist and the UK is relying on four firms to review its biggest companies.
“It is now for the Government to take our recommendations forward to legislation and audit firms need to be prepared to adopt these reforms if they are brought into law.”