The Financial Reporting Council (FRC) has told the Big Four to accelerate the ring-fencing of their audit businesses by strengthening independent governance and improving financial transparency.
The regulator wrote to Deloitte, EY, KPMG and PwC this week to set out details of the ‘operational separation’ blueprint, according to Sky News.
The FRC is reported to have told the firms that they must create separate boards for their audit practices with an independent chairman.
The Big Four will also be required to have a majority of independent directors on their audit boards, to reflect the governance code that applies to the quoted companies whose accounts they oversee.
Sky News sources said that the FRC had also sent a letter to a number of challenger firms, including BDO, Grant Thornton and Mazars.
The Big Four have faced calls for a wholesale split following the accounting scandals at companies like BHS and Carillion.
The lack of competition in the sector has come under the microscope after companies received clean bills of health from their auditors shortly before their collapse.
The FRC were contacted for comment.