KPMG to phase out non-audit work for British bookkeeping clients

Business

KPMG has plans to phase out advisory work for its British accounting clients, marking a first for the “Big Four” firms trying to head off a possible break-up.

The Competition and Markets Authority (CMA) is under pressure to consider separating out the audit and non-audit operations of KPMG, Ernst & Young, PwC and Deloitte to make it easier for smaller rival audit firms to expand and increase their customer choice.

Bill Michael, head of KPMG in Britain, told partners in a note on Thursday that it would phase out non-audit work for top audit customers, a step that would cut fees over time. “We will be discussing this point with the CMA in due course.”

KPMG audits 91 of the top 350 firms, earning £198 million (R3.7 billion) in audit fees and £79m in non-audit fees, figures from the Financial Reporting Council show.

PwC said there were already measures in place to control non-audit services to an audit client and that it looks forward to seeing the CMA’s analysis on how well they have worked.

“We appreciate that further commitments to limit non-audit services to audit clients could be necessary to promote confidence in the independence of audit firms, particularly for those companies in the listed market,” PwC said in a statement.

Legislators want auditors to spell out more clearly a company’s prospects as a going concern.

Michael said that KPMG would seek to have all FTSE 350 companies adopt “graduated findings”, allowing the auditor to add more comments about a company’s performance beyond the required minimum.

Ernst & Young declined to comment and Deloitte had no immediate comment on whether they would mirror KPMG’s decision on UK non-audit work.

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