KPMG to stop providing extra services for audit clients

The KPMG offices at 15 Canada Square Canary Wharf

The firm's chairman said the move was to "remove even the perception of a possible conflict" of interest.

KPMG came under fire for signing off Carillion's accounts months before its collapse.

The latest annual figures for FTSE 350 clients show KPMG took in £198m in audit fees, alongside £79m in non-audit fees for services such as consulting, systems integration or tax planning, while Deloitte took £171m in audit fees and £103, in non-audit fees.

KPMG has been singled out for regulatory criticism by the Financial Reporting Council (FRC), which slammed it for a series of failures and claimed its audits were undergoing an "unacceptable deterioration" in quality.

Chairman Bill Michael has outlined a plan to partners to phase out all non-audit services deemed non-essential.

Barnes called for the introduction of a cap on how many large audit contracts any firm can have, a stronger governance structure, and a ban on the provision of non-audit services to FTSE 350 and large unlisted public interest entity audit clients.

In the document, obtained by Sky News, Michael said that "to remove even the perception of a possible conflict, we are now working towards discontinuing the provision of non-audit services [other than those closely related to the audit] to the FTSE-350 companies we audit".

And the Competition and Markets Authority watchdog will look into ways to increase choice and strengthen competition.

KPMG's response to the Kingman and CMA inquiries also sets out its belief that FTSE-350 companies" audit reports should include "graduated findings' as standard practice.

Two of the world's biggest accountancy firms have backed a ban on United Kingdom auditors selling extra services to their audit clients, setting the stage for a huge shift in the embattled sector.

PwC said it was "open to embracing change" and recognised that further moves to limit non-audit services to audit clients "could be necessary".

"Critics are increasingly comparing the Big Four to Arthur Anderson, which was heavily involved in the Enron accounting scandal which caused the US" largest energy firm to go bust.

This follows widespread criticism of Big Four audit firms - which now audit 97 per cent of FTSE-350 companies - having conflicts of interest, reining in criticism of audit clients for fear of not upselling consultancy add-ons.

Mr Michael also said that regulators and other stakeholders bore part of the "responsibility for rectifying the erosion of trust", labelling the current regulatory landscape "complex and unclear". The big four carried out more than 95% of the audits for FTSE 350 firms a year ago, according to figures from the Financial Reporting Council.

But the accounting industry has faced a lot of criticism in the last few years over whether their verdicts on companies' accounts can be trusted.

Specifically, the FRC is looking into whether consulting work performed by an auditor on a company it is auditing should be banned to "prevent auditor independence being compromised".

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