The Labour party is weighing up radical plans to break up the Big Four accountancy firms, amid mounting pressure on the UK’s scandal-hit auditors.
Shadow chancellor John McDonnell vowed to end what he described as a “cartel” among the country’s largest bean counters in the run-up to his party conference this weekend.
“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,” McDonnell told the Financial Times.
The calls to clamp down on the Big Four firms – Deloitte, EY, KPMG and PwC – have grown in recent months in the wake of several crises that have embroiled the auditing sector.
Earlier in the summer the Financial Reporting Council (FRC), the UK’s auditing watchdog, stepped up pressure on the Big Four for a series of alleged misconducts and accountancy blunders.
Late last month KPMG was slapped with a £2.1 fine from the FRC over its audit of fashion retailer Ted Baker.
Meanwhile, PwC was hit with a record £10m fine from the FRC earlier in the summer over its auditing of BHS and Taveta Group.
Carillion’s collapse at the beginning of the year also dealt a huge blow to the reputation of the Big Four firms, all of which were in some way involved in working with the embattled construction company before its demise.
While Deloitte was Carillion’s sole internal auditor, KPMG serving as external auditor, EY gave turnround advice and PwC advised the company, its pension schemes and the government.
Amid Carillion’s collapse MPs demanded that the firms be referred to competition authorities for a potential break-up following Carillion’s collapse, and in June the FRC revealed it was taking recommendations to impose much bigger penalties for serious misdeeds by the world’s biggest accountants.
Tougher steps to curtail the wrongdoings of accountancy firms by the FRC comes after the watchdog faced several criticism from MPs for being too slow to take on the Big Four over a series of auditing blunders.