Leaked paper reveals FRC proposed audit demergers

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The Financial Reporting Council is said
to have drawn up, and now rejected, a plan to force the Big Four to spin off
their audit arms.

The FT says this morning that is has seen a
draft document outlining the implications of a proposal to force the big firms
to demerge their audit functions, created as part of the Market Participants’
Group’s discussions.

The paper cites two sources saying that the idea has been dropped. The leak
of the spin-off idea has surprised observers, since the secrecy of the group’s
discussions has been insisted on by all parties.

The regulator is reported to have said that spin-offs could be an effective
way of widening choice, the impact on quality was unknown and that the move
would come at a small but not intolerable cost.

FRC chief exeucitve Paul Boyle said: ‘Until the MPG has a chance to comment
it would be unsafe to assume any of these proposals will see the light of day.
They’re not official policy.’

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