KPMG is the first of the Big Four accounting firms to stop non-audit work for FTSE-350 clients.
Sector scandals surrounding the Carillion and BHS collapses, a review by ex Treasury boss John Kingman, and probes by the FRC and the CMA will have played a big part in the move.
Bill Michael, UK chairman, wrote to the group’s UK partners saying KPMG was putting an end to all but essential non-audit services for the 90 big groups that it audits.
Regulatory framework
“We have also been clear that this would be most impactful if implemented within a regulatory framework for all FTSE350 companies and we will be discussing this point with the CMA in due course.”
KPMG came under increasing pressure after Carillion went bust in January owing more than £5bn. KPMG’s audit fees were about £1.5m, with further millions from non-audit work.
Integrity of capital markets
Steve Harris, who served on the Public Company Accounting Oversight Board from 20019-18, said recently: “The auditing profession plays a vital role in maintaining the integrity of the world’s capital markets, but recent audit failures are renewing doubts about whether the world’s largest accounting firms are truly serving the public interest.”
He added: “Although the firms have a public obligation to produce independent audits, they are paid by the companies they inspect, making them vulnerable to management pressure and bias.
“Today’s Big Four are not just accounting firms. Instead, they offer a wide variety of consulting and advisory services under one umbrella, including investment banking, asset management, legal services, cyber security, personnel recruitment, advertising and marketing campaigns.
“These services have become a lucrative line of business for the Big Four, bringing in large annual revenue increases.”