By Huw Jones
LONDON (Reuters) – A senior British lawmaker leading a review of the world’s top accounting firms said on Thursday there is cross-party consensus for change, calling the approach of the “Big Four” complacent.
“I hope that this inquiry and report will show the government there is strong consensus, they can bring legislation forward on some of the changes,” Rachel Reeves, chair of parliament’s business committee, told Reuters.
The committee’s report in March will say if proposals from the Competition and Markets Authority (CMA) to improve choice and quality in audit need to go further.
Business minister Greg Clark was supportive and Andrew Tyrie, a former lawmaker behind banking reforms who now chairs the CMA, also wants to push through change, Reeves said.
But parliamentary time is clogged with preparations for Brexit, making it difficult to get any legislation adopted.
The CMA proposed that companies hire two auditors, one not from among the “Big Four of Deloitte, KPMG, EY and PwC, which check the books of most British blue chip firms. They would also have to put audit and consulting into different units.
Big Four officials told MPs during a committee hearing on Wednesday that they accepted the need to improve audit quality, but that joint audits and separation of audit and consulting will not achieve this.
The four firms have offered caps on how many of Britain’s top 350 listed companies they could audit to give smaller rivals like Grant Thornton and BDO a better chance of winning business, something that Reeves said she was concerned about.
“You have to ask the question why they are more relaxed about the market share cap, and about shedding 20 or 30 clients – is it because they are not profitable?” Reeves told Reuters.
“They are offering something a bit too easily … There were a few times I felt that despite the warm words, they were quite complacent,” she said following the hearing.
Scandals at retailer BHS, construction firm Carillion and cafe chain Patisserie Valerie showed auditors were falling short as a “second line of defence”, Reeves said.
“There wasn’t enough concrete stuff … from the audit companies about audit quality in light of these scandals, and what they are going to do to fix it,” she added.
Reeves welcomed moves by three of the Big Four to ban consulting work for audit clients, saying she will check on progress by year-end.
(Reporting by Huw Jones; Editing by Alexander Smith)