The big four accountancy firms have been told by watchdogs to accelerate the ring-fencing of their audit businesses by bolstering independent governance and improving financial transparency.
Sky News has learnt that the Financial Reporting Council (FRC) wrote to the quartet – Deloitte, EY, KPMG and PricewaterhouseCoopers (PwC) – this week to set out details of the ‘operational separation’ blueprint that it hopes will improve audit quality following a string of corporate scandals.
In the letter, the FRC is understood to have told the four firms, which collectively have a dominant share of the market for auditing major listed UK companies, that they must create separate boards for their audit practices with an independent chairman.
The chair could not be a partner at the firm, although further details of the criteria to determine independence have yet to be finalised.
The big four will also be required to have a majority of independent directors on their audit boards,…