Three of the Big Five firms pledged this week that they have no intention of selling their consultancy businesses despite Ernst & Young’s planned $8bn consultancy sale to Cap Gemini, which will protect the firm against accusations of conflicts of interest. The sale, due to be finalised within weeks, comes as the US Securities and Exchange Commission dealt an embarrassing blow to PricewaterhouseCoopers over its employees’ purchase of shares in audit clients. The move is part of a range of initiatives backed by the SEC to tighten audit quality. A further report is already planned for April by an Audit Effectiveness Panel, which it created in response to a growing concern over the effectiveness of audits. Auditing Practices Board technical director Jon Grant warned the SEC’s concerns about the quality of financial reporting would have international ramifications because of its membership of international securities body IOSCO. Many insiders are already placing bets on a UK-wide investigation initiated by the newly formed Review Board, which is part of the Foundation, as early as this year. Although PwC said none of its UK partners and staff had violated share ownership rules, it was undergoing a structural review. ‘We are looking at all the options and we are looking at some time before the spring for an answer on the way forward,’ said a spokesman. FTSE-100 group of finance directors chairman and Glaxo Wellcome finance director John Coombe said he did not believe UK auditors directly held shares in client companies, but urged firms to check that pension funds which retired partners belonged to did not hold shares in client firms. There has been speculation that conflict of interests may require firms to split audit and consulting businesses. But Deloitte & Touche, Arthur Andersen and KPMG said they had no intention of selling consulting arms. Deloitte & Touche said the firm took conflicts of interest seriously and required staff to sign a restricted entities list, while KPMG said there would be no UK sale but the firm’s planned US consultancy float remained on track subject to SEC approval.
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