Audit split could be stalemate for Big Four

EUROPEAN COMMISSION audit reform proposals could see major firms split down the middle, unable to perform both audit and non-audit services under the same umbrella.

Audit firms might also be prohibited from belonging to a network that provides non-audit functions, meaning, for the sake of argument, that PwC Audit Ltd would not be able to borrow consultants from PwC Business Services Ltd.

But what if auditors need friendly non-audit experts to help them along? What if risk managers and actuaries who currently lend a hand are no longer in the same firm, and close association between the two is forbidden?

PwC Audit Ltd might have to call on KPMG Business Services Ltd for help. But would KPMG be interested? If its consultants work on another firm’s audit, independence rules might conflict them out of providing their own non-audit services to the company in question.

Such a situation would hog-tie the Big Four, and their clients probably wouldn’t be too happy about it either.

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