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KPMG's Audit Quality Is ‘Unacceptable,’ U.K. Regulator Says

  • There are calls to dismantle U.K.’s Big Four accounting firms
  • FRC watchdog has stepped up interventions with KPMG, PwC fines
A logo sits on display outside the offices of KPMG in London.

A logo sits on display outside the offices of KPMG in London.

Photographer: Simon Dawson/Bloomberg

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KPMG’s audit work in the U.K. is of an unacceptable standard, Britain’s accounting regulator said, fueling calls to reform the industry, including dismantling the “Big Four” players.

In an unprecedented assessment, the Financial Reporting Council said auditors at KPMG don’t challenge management enough, aren’t sufficiently skeptical and are inconsistent in their execution of audits. The decline in quality over the last five years “is unacceptable and reflects badly” on efforts by previous leadership to improve the work, the watchdog said.