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.
The FRC has told EY, Deloitte, KPMG, and PwC they must create separate boards—with a majority of independent directors sitting on them—for their audit practices and that they must be led by independent chairmen.
