Interesting to note that a large number of people in East Devon have been pointing out deficiencies in internal and external audit foy YEARS!
“The government has called for a comprehensive review of Britain’s auditing industry in what could herald huge changes to a sector dominated by the firms known as the big four.
Calls for reform have grown after the collapse of the construction giant Carillion and the former high street stalwart BHS revealed serious inadequacies in the auditing process.
The business secretary, Greg Clark, said it was “right to learn the lessons and apply them without delay” as he ordered the inquiry into competition within the industry where Deloitte, PwC, Ernst & Young and KPMG audit 98% of the UK’s largest listed companies.
“The collapse of Carillion exposed deficiencies in an audit process, where the market is dominated by just four large firms,” Clark said, in an interview with the Financial Times.
He added: “We know competition is one of the key drivers for maintaining and improving standards, so I have asked the Competition and Markets Authority to consider looking again at what can be done to improve the audit sector.”
Thousands of jobs were lost following Carillion’s collapse in January, with a subsequent parliamentary report finding that Deloitte – which received £10m to be the outsourcing company’s internal auditor – had been either “unable or unwilling” to identify failings in financial controls, or “too readily ignored them”.
Ernst & Young was paid £10.8m for “six months of failed turnaround advice”. Elsewhere, PwC was fined £10m by the Financial Reporting Council (FRC) for signing off on the accounts of BHS, before its sale for £1. The retailer collapsed in 2016, prompting the loss of 11,000 jobs.
Frank Field, the chairman of the work and pensions committee, said poor business practices were “waved through by a cosy club of auditors, conflicted at every turn”.
The FRC has previously called for an inquiry into whether the big four should be broken up, with their audit divisions spun off. This year, Deloitte warned that such a measure could affect the UK’s standing as a global financial centre.
Labour welcomed the announcement, but claimed the Conservatives were “playing catch-up”. …”