Deloitte is restructuring its operations to comply with regulatory changes that followed a series of high-profile audit failures at Big Four accounting firms.
The Financial Reporting Council, the U.K. accounting watchdog, announced in July it had asked the firms to agree to separate their audit and consulting businesses and submit an implementation plan by Oct. 23 that will need to be completed by June 2024.
In its first move to implement its plan, Deloitte said Friday it would establish an audit governance board (AGB) to provide “independent oversight of the UK audit practice, with a focus on the policies and procedures for improving audit quality and ensuring the Financial Reporting Council’s objectives of, and desired outcomes for, operational separation are met.”
“The AGB is central to Deloitte’s new governance framework and a key step in the operational separation of our audit business from our wider firm,” Richard Houston, senior partner and chief executive of Deloitte UK, said in a news release.
The Big Four sign off on the accounts of more than 95% of the U.K.’s 350 largest listed companies. They have been under scrutiny since the collapse of government contractor Carillion, which had been audited by KPMG for 19 years.
A parliamentary committee called last year for a “full structural breakup” of the Big Four, but both the FRC and the U.K.’s competition watchdog recommended an operational split.
The FRC said Friday it welcomed Deloitte as an “early adopter” of its principles and that it encouraged all the Big Four firms to implement operational separation as soon as practicable.