PwC and EY’s UK firms have made the move to stop offering advisory services to their FTSE 350 audit clients by the end of the year.
PwC UK chairman Kevin Ellis and EY UK chair Steve Varley told MPs in an evidence session conducted by the Business, Energy, and Industrial Strategy (BEIS) Committee in relation to its Future of Audit Inquiry, that their firms would stop offering FTSE 350 audit clients non-essential advisory services by the end of year in order to curb the perception of conflicts of interest.
The firms follow KPMG, which said in November 2018 it would stop offering these services to its FTSE 350 clients.
However, in the evidence session, which was attended by senior members of each Big Four Firm, the general consensus from the Big Four representatives that splitting audit and non-audit into separate practices would not improve audit quality was reaffirmed.
Deloitte, which also had a representative present, made no such commitment.
The BEIS’ future of audit inquiry is just one of the reviews that is currently scrutinising the audit market in the UK; The Competition and Markets Authority (CMA) review and Kingman review published their initial findings at the end of December last year and the Brydon review is also in motion to assess the purpose of audit in the 21st century.
One of the CMA’s proposals was to create greater divide between audit and non-audit work service lines within firms. This move is being resisted by most of the leading networks and associations due to the belief that it would actually reduce audit quality, citing the need for a multi-disciplinary business model to attract and retain the best quality staff to perform this work.
Due to the high profile collapse of construction company Carillion in January 2018, the audit market was brought into public focus and faced and the national press. This highlighted the so-called ‘expectations gap’ and increased the perception of conflicts of interest of firms providing audit and non-audit work to their clients.