PwC, EY join consult ban to restore public trust in sector

PwC, EY join consult ban to restore public trust in sector

Business, EY, PWC, Consulting,

Two of the Big Four accounting firms said they will stop offering consulting services to audit customers in an effort to restore public trust in a sector shaken by corporate scandals.

PwC and EY told a panel of British lawmakers they would mirror a change already underway at another Big Four firm, KPMG, in a bid to end a “perception” of conflict between selling audit and consulting work to the same customer.

Consulting is better paid than audit work, raising concerns that an accountant won’t challenge a company’s management properly regarding an audit for fear of losing more lucrative advisory work.

KPMG said last November it would phase out advisory work for its British accounting clients. That came as the Big Four faced calls from lawmakers to be broken up after the collapse of construction firm Carillion, which KPMG audited. “We will do a ban on anything for audit clients other than audit-related services,” Kevin Ellis, chairman and senior partner of PwC UK told the British parliament’s business committee.

It would not improve audit quality, however, Mr Ellis said. The ban would be put in place over the next six months as new work comes up, Mr Ellis said. “Yes, we will follow that,” said Steve Varley, chairman of EY UK, adding that EY was consulting with clients about a ban.

The largest Big Four firm, Deloitte, said it wanted to see the final package of audit market reforms before deciding whether to stop offering consulting services to its top audit customers. Britain’s Competition and Markets Authority (CMA) has proposed measures to inject more choice in the audit market where the Big Four check the books of most big listed companies.

“We want to wait to see what the total package agreed is,” David Sproul, Deloitte UK’s senior partner and chief executive officer, told the business committee. “The CMA, in their interim findings, decided there was no problem with non-audit services,” Mr Sproul said.

Lawmakers are looking at how it could ensure that reforms being proposed by the CMA and plans to replace the sector’s regulator will be implemented.

Last week, Britain’s Financial Reporting Council opened a second investigation into how accounting firm KPMG audited the books of collapsed Carillion.

The FRC said that KPMG “self-reported” additional material related to Carillion’s audit.



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