BEIS Select Committee publishes Future of Audit report
Released 4 April 2019
The Department for Business, Energy and Industrial Strategy (BEIS) has published a report looking into reforming the UK audit market.
Following concerns about the audit industry arising during Committee inquiries into Carillion and BHS, the Government commissioned two independent reviews to look at regulation (Kingman) and the effectiveness of audit (Brydon), while the Competition and Markets Authority (CMA) has looked primarily at competition and resilience. The Committee report examines the core reporting and audit failures that brought down Carillion— the imprudent payment of dividends out of optimistically booked, and in hindsight unrealised, profits, and recommends the Government and the Financial Reporting Council urgently produce a clear, simple and prudent definition of what counts as realised profits. The Committee also examined conflicts of interest and auditor independence and recommends that that the Competition and Markets Authority (CMA) aims for a structural split or at the very least implements its proposed operational split between audit and non-audit operations within firms. If operational separation fails to produce improvements in culture, independence and transparency, the Committee recommends that the CMA implements a full structural break-up of the Big Four into audit and non-audit businesses.
View the report at Business, Energy and Industrial Strategy Committee: The Future of Audit.