The UK’s Big Four accounting firms have been told by the Financial Reporting Council (FRC) they have until 2024 to separate their audit practices from the rest of their activities in the largest shake-up of the industry in decades.
The behaviour of auditors amid a string of corporate failures has led to a recommended shake-up of auditing.
The Financial Reporting Council has issued principles for the operational separation of the audit units of PwC, Deloitte, KPMG and EY.
The firms have been told by the FRC they have to produce outlines for their plans to implement all 22 of its principles by the end of October 2020, and must complete the measures by June 2024.
“The FRC is now asking the Big 4 firms to agree to operational separation of their audit practices on this basis and to provide a transition timetable to complete implementation by 30 June 2024 at the latest,” said the FRC.
“An implementation plan should be submitted to FRC by 23 October 2020.
“The FRC will then agree a transition timetable with each firm.
“Thereafter the FRC will publish annually an assessment of whether firms are delivering the objectives and outcomes of operational separation.”
FRC CEO Jon Thompson said: “Operational separation of audit practices is one element of the FRC’s strategy to improve the quality and effectiveness of corporate reporting and audit in the United Kingdom following the Kingman, CMA and Brydon reviews.
“Today the FRC has delivered a major step in the reform of the audit sector by setting principles for operational separation of audit practices from the rest of the firm.
“The FRC remains fully committed to the broad suite of reform measures on corporate reporting and audit reform and will introduce further aspects of the reform package over time.”