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LONDON (Reuters) – Deloitte announced on Friday that its UK audit operations will have a standalone board from January to meet new regulatory requirements aimed at improving industry standards after a string of company failures.
Deloitte, one of the world’s “Big Four” accounting firms along with KPMG, PwC and EY, have all been told by their regulator, the Financial Reporting Council (FRC), to submit plans by October 23 to ring fence their UK audit arms.
The aim of “operational separation” at Big Four accountants in Britain is to make them focus better on their work, be more challenging towards clients, and avoid conflicts of interest with consultancy work.
The FRC set out principles for underpinning ring fencing earlier this year, including the creation of an independent audit governance board (AGB).
The collapse of UK builder Carillion and retailer BHS led to a welter of proposed reforms aimed at improving book checking standards, including replacing the FRC with a stronger watchdog.
“The AGB is central to Deloitte’s new governance framework and a key step in the operational separation of our audit business from our wider firm,” Richard Houston, senior partner and chief executive of Deloitte UK, said in a statement.
“We continue liaising with the FRC on the best ways to implement further changes to our governance and reporting structures.”
The FRC said on Friday that it encourages all the Big Four auditors to implement its principles for operational separation as soon as practicable.
