By Huw Jones
The Competition and Markets Authority (CMA) is under pressure to consider separating out the audit and non-audit operations of KPMG, EY, PwC and Deloitte 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 business.
"We will be discussing this point with the CMA in due course," KPMG's Michael said.
Non-audit work that affects audits would continue.
FRC graphic: https://tmsnrt.rs/2Pf4gOC
"We appreciate that further commitments to limit non-audit services to audit clients could be necessary to promote confidence in the independence of audit firms, particularly for those companies in the listed market," PwC said in a statement.
Deloitte 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 FTSE 350 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 BHS.
EY declined to comment on whether it would mirror KPMG's decision on UK non-audit work.
($1 = 0.7632 pounds)
(Reporting by Huw Jones; Editing by Alexander Smith, David Goodman and Alexandra Hudson)
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