The Financial Reporting Council (FRC) has written to the U.K.’s largest audit firms setting out the regulator’s expectations for how they should achieve “operational separation”—essentially, splitting external audit from consultancy work—in an effort to bring about improvements in audit quality, as well as stimulate greater competition in a market the Big Four overwhelmingly dominate.

Neil Hodge is a freelance business journalist and photographer based in Nottingham, United Kingdom. He writes on insurance and risk management, corporate governance, internal audit, compliance, and legal...