PwC to Restructure U.K. Audit Practice

Amid growing pressure from regulators, the firm announced plans for a significant transformation of its audit business.
PwC to Restructure U.K. Audit Practice

Audit company PwC said it would split its U.K. assurance practice, recruit 500 experienced auditors, and spend $38 million to restore the trust of investors as part of a restructuring of its practice in the United Kingdom.

PwC, one of the Big Four accounting firms that includes Deloitte, Ernst & Young, and KPMG, will split its U.K. assurance practice into two businesses, effective July 1.

The audit practice will focus on external audit and audit-related services. PwC’s risk assurance practice will conduct internal audits and work on issues such as cybersecurity and technology risk.

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In April, the U.K. Competition and Markets Authority recommended legislation that would require the Big Four accountancies to further separate their audit businesses and their consulting businesses to reduce conflicts of interest. The CMA also said the big consultancies should have to hire smaller rivals to increase competition.

As part of the restructuring, PwC will focus on training, audit quality, and a new emphasis on culture.

The company is commissioning Karthik Ramanna, a professor of business and public policy at Oxford University, to study the culture around auditing.

“The investments and changes we are putting in place will ensure that our people have the skills, knowledge, and mindset to perform audits to a consistently high quality day-in, day-out,” said Hemione Hudson, head of assurance at PwC.

The company plans to double face-to-face training for experienced auditors and increase the number of specialists in its quality-control team by two thirds.

The U.K. Financial Reporting Council fined PwC $8.3 million over its audit of retailer BHS, saying the company failed to give proper consideration to risks that could have caused BHS to fail as a going concern. PwC partner Stephen Denison recorded only two hours of work on the audit.

Denison was fined and effectively banned from auditing for 15 years.

BHS collapsed days after the audit was completed.