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Around the World

FRC orders the Big Four to separate auditing from consulting services

The Big Four firms now reportedly generate the largest portions of their revenues from consultancy services.

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Big Four

The world’s four biggest audit firms —KPMG, PwC, Ernst & Young, and Deloitte — have been directed by the Financial Reporting Council (FRC) to plan towards separating their audit services from their consulting services.

The deadline for compliance with this directive is June 2024.

A statement that was published on the FRC website said this directive is ‘world-leading’. The statement also explained why it became imperative to separate the firms’ operations towards ensuring that they deliver the uttermost quality audit services for the good of public interest.

By the time the operational separation officially takes effect starting from June 2024, FRC said it would be expecting the following outcomes:

  • That audit practice governance would prioritise audit quality and protect auditors from influences from the rest of the firm that may try to divert their focus away from audit quality.
  • That the total amount of profits distributed to the partners in the audit practice does not persistently exceed the contribution to profits of the audit practice.
  • The culture of the audit practice prioritises high-quality audit by encouraging ethical behaviour, openness, teamwork, challenge and professional scepticism/judgement.
  • Auditors act in the public interest and work for the benefit of shareholders of audited entities and wider society.

While commenting on this development, FRC’s Chief Executive Officer, Sir Jon Thompson, said the FRC is committed to reforms on how corporate finances are reported. Further aspects of the reform package will be introduced over time, he said.

“Operational separation of audit practices is one element of the FRC’s strategy to improve the quality and effectiveness of corporate reporting and audit in the United Kingdom following the Kingman, CMA and Brydon reviews. Today the FRC has delivered a major step in the reform of the audit sector by setting principles for operational separation of audit practices from the rest of the firm. The FRC remains fully committed to the broad suite of reform measures on corporate reporting and audit reform and will introduce further aspects of the reform package over time,” Thompson stated.

Do note that the FRC reached this decision after engaging in extensive discussions with the Big Four. It was also agreed that the audit firms will submit an implementation plan to the FRC latest by October 23rd, 2020.

Recall that it was just last week when Nairametrics reported how the Big Four earned the sum of N7.53 billion as audit fees from Nigeria’s most capitalized firms in 2019. Interestingly, these firms now reportedly generate the largest portions of their revenues from consultancy services. As a matter of fact, only about 20% of their revenues now come from auditing fees.

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Emmanuel is a professional writer and business journalist, with interests covering Banking & Finance, Mergers and Acquisitions, Corporate Profiles, Brand Communication, Fintech, and MSMEs.He initially joined Nairametrics as an all-round Business Analyst, but later began focusing on and covering the financial services sector. He has also held various leadership roles, including Senior Editor, QAQC Lead, and Deputy Managing Editor.Emmanuel holds an M.Sc in International Relations from the University of Ibadan, graduating with Distinction. He also graduated with a Second Class Honours (Upper Division) from the Department of Philosophy & Logic, University of Ibadan.If you have a scoop for him, you may contact him via his email- [email protected] You may also contact him through various social media platforms, preferably LinkedIn and Twitter.

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    Around the World

    Chad’s President Deby dies of injuries suffered on the frontlines, as son takes over

    The President had visited the frontlines to share his election victory with the soldiers before the unfortunate incident.

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    President Idriss Deby of Chad has died of injuries suffered on the frontlines when some terrorists attacked the army. The President had visited the frontlines to share his election victory with the soldiers before the unfortunate incident.

    The departure of the newly re-elected President was disclosed by the AFP News Agency on Tuesday through its Twitter handle.

    It tweeted, “#UPDATE Chad’s newly re-elected President Idriss Deby Itno, in power for three decades, died Tuesday of injuries while fighting rebels in the north of the Sahel country, the army says.”

    Meanwhile, a four-star general who is a son of Chad’s slain president Idriss Deby Itno will replace him at the head of a military council, the army announced Tuesday.

    “A military council has been set up headed by his son, General Mahamat Idriss Deby Itno,” the army’s spokesman, General Azem Bermandoa Agouna, said on state radio, shortly after the announcement that the newly re-elected president had died of wounds while fighting rebels in the north of Chad.

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    Around the World

    Elon Musk loses an estimated $6bn after a Tesla car accident killed two people

    Elon Musk’s net worth dipped by $6 billion following a tragic Tesla car accident that killed two people.

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    Elon Musk, Tesla, SEC, Stock, Twitter, COVID-19: Tesla’s Elon Musk to produce ventilators as fast-spread of disease lingers

    The second richest man in the world, Elon Musk, witnessed his wealth shed an estimated $6bn after a Tesla car was involved in an accident that led to the death of two people.

    Tesla stocks dropped by 3.8% after the news of the crash went mainstream. The resultant effect on Elon Musk’s wealth was a $5.71bn loss in a single day.

    READ: Google threatens to remove its search engine from Australia due to media code

    The Accident

    Two men lost their lives on Saturday night in Houston when their 2019 Tesla model car slammed into a tree. Police authorities on sight claimed the car might have been on autopilot due to the sitting position of the corpses.

    They also struggled to put out the fire from the Tesla car and even called Tesla for help. The death of the two men has sparked a heated argument between Tesla and its critics. Autopilot or not?

    Although police officers’ assertion that the car may have been on autopilot remains unconfirmed, it has raised serious uncertainty about the safety of Tesla’s autopilot feature and Tesla’s critics are not backing down on this.

    READ: Dealers explain why ‘Tokunbo’ Cars are expensive

    Elon Musk reacts

    Elon Musk has reacted to the news, insisting that the autopilot feature in the crashed vehicle was not enabled. According to him, the Wall Street Journal’s coverage of the accident was not professional.

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    READ: Meet the 39 years old Chinese billionaire electric car maker 

     

    British airways

    What you should know

    Elon Musk is now worth $183bn following the recent drop. He closed the gap on Amazon’s Jeff Bezos to $4bn early last week. The gap has widened to $14bn today.

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