The Labour party is mulling some radical plans to break up the Big Four accountancy firms. It comes amid heightening pressure on the scandal-hit auditors of the United Kingdom.
John McDonnell, the shadow chancellor, promised to end what he described as a “cartel” among the largest bean counters in the country in the run-up to his party conference that is scheduled to be held this weekend.
In an interview with the Financial Times, McDonnell stated: “They have demonstrated that they have a range of conflicts of interest… I don’t think they have addressed the public anger about their role.”
The proposals to clamp down on the Big Four companies – EY, Deloitte, PwC, and KPMG – have intensified during the past months amidst numerous crises that have deranged the auditing sector.
Earlier in the summer, the auditing watchdog of the United Kingdom, the Financial Reporting Council (FRC), stepped up the pressure on the Big Four for a series of alleged accountancy blunders and misconducts.
Late last month, KPMG was imposed with a £2.1 fine from the FRC after its audit of Ted Baker, a fashion retailer.
Meanwhile, earlier in the summer, PwC was imposed with a record £10m fine from the FRC after its auditing of the Taveta Group and the BHS.
The collapse of Carillion at the start of the year also brought a huge blow to the reputation of the Big Four companies, which were all involved in some way in working with the embattled construction firm before its demise.
While Deloitte was the sole internal auditor of Carillion, KPMG served as its external auditor. EY also gave turnround advice and PwC served as the adviser of the company, its pension schemes and the government.
Amid the collapse of Carillion, MPs demanded that the companies be referred to competition authorities for a potential break-up after the collapse of Carillion. Last June the FRC revealed that it was taking recommendations to impose higher penalties for serious misdeeds by the biggest accountants in the world.
Tougher steps that were taken by the FRC to correct the wrongdoings of accountancy firms comes after the watchdog experienced criticism from MPs for being too slow to take on the Big Four after a series of auditing blunders.