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KPMG to phase out non-audit work for British bookkeeping clients

Reuters  |  LONDON 

By Jones

LONDON (Reuters) - will phase out advisory work for its British accounting clients, marking a first for the "Big Four" firms trying to off a possible break-up.

The (CMA) is under pressure to consider separating out the audit and non-audit operations of KPMG, EY, and to make it easier for smaller rivals to expand and increase customer choice.

The Big Four check the books of nearly all of Britain's top 350 listed companies, while at the same time earning millions of pounds in fees for non-audit work. Lawmakers say this raises potential conflicts of interest because they are less likely to challenge audit customers for fear of losing lucrative

Bill Michael, of in Britain, told partners in a note on Thursday that it will phase out non-audit work for top audit customers, a step that will cut fees over time.

"We will be discussing this point with the CMA in due course," KPMG's Michael said.

Non-audit work that affects audits would continue.

audits 91 of the top 350 firms, earning 198 million pounds ($259 million) in audit fees and 79 million pounds in non-audit fees, figures from show.

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said there are already measures in place to control to an audit client and that it looks forward to seeing the analysis on how well they have worked.

"We appreciate that further commitments to limit to audit clients could be necessary to promote confidence in the independence of audit firms, particularly for those companies in the listed market," said in a statement.

said it would support a ban on to FTSE350 audit customers.

also proposed a market share cap for segments or subsets of the market, "which would over time seek to address choice and competition issues, reducing barriers to entry as well as concerns around resilience of the audit market."

Lawmakers want auditors to spell out more clearly a company's prospects as a going concern.

Michael said that KPMG would seek to have all companies adopt "graduated findings", allowing the auditor to add more comments about a company's performance beyond the required minimum.

"Our intention is that graduated findings should become a market-wide practice," Michael said.

The CMA is due to complete a fast-track review of Britain's audit sector by the end of the year. This was prompted by lawmakers looking into the collapse of construction company Carillion, which KPMG audited, and failures such as that of retailer

The watchdog could ask for specific undertakings, such as a limit on the number of clients, or push ahead with an in-depth investigation if it felt more are needed.

declined to comment on whether it would mirror KPMG's decision on UK non-audit work.

($1 = 0.7632 pounds)

(Reporting by Jones; Editing by Alexander Smith, David Goodman and Alexandra Hudson)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Fri, November 09 2018. 01:34 IST