“These final principles follow extensive discussions with the audit firms,” the regulator said. “The FRC is now asking the Big Four
firms to agree to operational separation of their audit practices on this basis and to provide a transition timetable to complete implementation by June 30, 2024 at the latest.”
The guidelines aim to shield auditors from being influenced by other part of a firm’s business “that could divert their focus away from audit quality,” the regulator said. “KPMG
supports operational separation in the UK,” Jon Holt, the firm’s head of UK
auditing said in a statement. “It is clear however that operational separation of the UK’s audit firms is just the first step on the journey to restoring trust in UK.
Spokespeople for Deloitte
and EY were either not available or didn’t immediately return messages seeking comment outside office hours.
“We share the FRC’s objectives of improved quality and confidence in audit,” PwC said in statement. “We will continue to engage constructively with the FRC on the complexity and detail of these principles.”
Audit practice culture should encourage ethical behaviour, openness, teamwork, challenge and professional skepticism and judgment, it said.
Profits distributed to partners should not “persistently exceed the contribution to profits if the audit practice,” the FRC said.
The firms should submit an implementation plan by October 23 and the FRC will agree a transition timetable with each firm. It will then publish an assessment every year of how well each audit firm is complying with the principles.