At Last, a Small Step to Fix Audit’s Conflict of Interest
KPMG’s British arm is doing the right thing. Others should follow, even if it proves costly for them.
Right direction.
Photographer: Simon Dawson/Bloomberg
One of the Big Four accounting firms has taken a welcome step to improving the credibility of the financial statements published by London-listed companies. But KPMG LLP’s plan to stop doing almost all consulting work for the FTSE-350 clients it audits should be only the first step in addressing the profession’s wonky economics.
KPMG’s British arm is anticipating regulation rather than being bounced into it. U.K. trustbusters are already probing the audit market, and the Financial Reporting Council, the industry’s regulator, is the subject of a government review. KPMG is under particular pressure to show it can improve the quality of its work: It signed off on the accounts of Carillion Plc shortly before the construction firm collapsed. The firm was also called out by the FRC over the reliability of its audits earlier this year.