Four accountancy firms complete FRC governance transition
October 14, 2024
The companies established independent audit boards, chaired by non-executive auditors, to oversee operations.
Four accountancy firms—PwC, KPMG, Deloitte, and EY—have completed a three-year transition to bolster governance and audit quality, as per the Financial Reporting Council (FRC).
This is aimed at enhancing the quality of audits.
During the transition, the firms established independent audit boards, chaired by non-executive auditors, to oversee operations.
They have increased transparency regarding financial interactions between their audit and non-audit services and are said to have instilled firm-level accountability for the separation’s execution.
These measures are part of an effort to cultivate audit-specific cultures that emphasise challenge, openness, and professional scepticism.
The FRC confirmed that all four firms met the implementation deadline for the principles of operational separation.
The Council will now begin publishing annual assessments of the firms’ compliance with these principles.
Operational separation, initiated in 2020, required the firms to voluntarily segregate their UK audit and non-audit practices to prioritise quality audit delivery for the public interest.
The ongoing monitoring will be done alongside supervisory actions to further enhance trust in UK businesses.
This month, the FRC plans to release minor revisions to the operational separation principles and update the Audit Firm Governance Code accordingly.
FRC Supervision executive director Sarah Rapson said: “The FRC is pleased with the spirit in which the firms have embraced operational separation and the progress achieved to date.
“Since 2020, there have been notable improvements in audit quality at the Big Four which has been underpinned by wider regulatory improvements.”
Earlier in the month, the FRC noted an increase in the number of students pursuing the ACA qualification, with a reported 8.5% rise to 24,348 in the UK and Republic of Ireland.
[The Accountant]
