UK watchdog wants power to cap Big Four’s FTSE 350 audit clients
The UK’s Supreme Accounting Regulator has called on the minister to empower the minister to limit the number of large listed companies that a single company can audit to promote competition with the big four accounting firms. rice field.
However, Sir John Thompson, CEO of the Financial Reporting Council, questioned whether the government would proceed with legislation to increase the responsibility of directors for the accuracy of financial statements. cost concern.
The government will announce an updated proposal later this year for the planned plan. overhaul After a 16-week consultation that ended in July, we will discuss auditing and governance of large UK companies.
The long-lagging reforms were designed to undermine the responsibilities of the audit industry and directors as a result of a series of accounting. scandal At companies such as Carillion and BHS.
The talks included a plan to force FTSE 350 companies using one of the four major auditors (Deloitte, EY, KPMG, or PwC) to appoint a mid-tier company to audit some of their subsidiaries. I did. The proposal included a reservation right to impose a market share cap on Big Four if the plan failed to improve competition.
But during the talks Big Four was denied While sharing audits, there are also small rivals I’m a little interested..
Instead, some companies said they wanted a cap on market share. This approach was also widely endorsed by the Chairman of the Audit Committee, Thompson told an event hosted by the Association of Certified Accountants in the United Kingdom and Wales on Monday.
He said “there is no easy solution” to Big Four’s hegemony and called on the minister to empower him to impose market share caps and shared audits. These are “used in the appropriate way depending on the company involved”. “
Thompson’s comments show that the previous stance of regulators has eased. “The worst result is [the reforms] No one can find a compromise, so they die and are killed by stones, “said one who knew the FRC’s position.
According to Thompson, the response to the consultation provided “significant support” for changes in areas such as oversight of corporate audit committees.
But Mr. Thompson pointed out that the overhaul included a rule requiring directors to approve the company’s internal control over financial reporting, which was considered a key element of the reform proposal.
He said the minister faced an “important political decision” as to whether to proceed with the introduction of the so-called UK socks requirement, a version of the Survey-Oxley Regulations enforced by U.S. authorities in 2002 after the Enron scandal. Stated.
Mr. Thompson said there was “significant feedback” on the cost of the new measures, the most important of which was the British Socks Act. He said that any decision must be “very carefully” weighed against the increased costs and benefits.
He added that regulators could act if the government did not introduce legislation in this area through the corporate governance code of listed companies. However, companies do not have to adhere to the norms as long as they explain why.
Hywel Ball, UK Chairman of EY, said the introduction of Sarbanes-Oxley in the United States showed that “the increase in value far outweighs the cost of additional regulation.”
The government has not made a decision and said it would “soon respond to talks.”