Big Four in trouble?
Just days after announcing that it would open an investigation into KPMG’s audit of Carillion’s accounts between 2014 and 2016, Financial Reporting Council (FRC) today suggested that competition regulators should investigate the audit market.
According to the BBC, Frank Field, the chair of the Work and Pensions Committee, asked today whether the big four accounting firms — KPMG, PwC, Deloitte and EY— should be broken up in the wake of the firm’s collapse
To this, Stephen Haddrill, chief executive of the Financial Reporting Council, told the parliamentary committee that there should be “more competition in the major accounting and audit area”.
Rachel Reeves, chair of the Business, Energy and Industrial Strategy Select Committee, accused the watchdog today of “closing the gate after the horse has bolted”, but Haddrill denied claims that the FRC was “toothless”.
“Investors in a company have the right to know that you were actively monitoring a situation, presumably because you were concerned about it,” Reeves said, adding: “Why wasn’t that information in the public domain? And why in the six months of actively monitoring – the most critical six months probably for that business in its short 19-year life – did nobody know you were actively monitoring?”
Haddrill said the FRC was unable to warn investors of its concern due to a confidentiality requirement that is built into legislation, and that the law in this area should be reviewed.
KPMG was been the auditor of Carillion for 19 years, and signed off on its numbers last March, four months before it issued its first profit warning.