The UK Select Committee has called on the new chairman of the Competition and Markets Authority (CMA) Andrew Tyrie to ask his staff ‘to initiate that review as soon as possible’.
The Select Committee published an investigation into the collapse of Carillion, but even before this was published Tyrie had described the Big Four as an ‘Oligopoly’ which needs to be looked into.
The Carillion report found that KPMG and Deloitte, the company’s external and internal auditors respectively, were partly responsible for the company’s collapse due to failing to exercise professional scepticism and risk management failures. The report noted that there were ‘conflicts of interest at every turn’ and suggested that the UK Government should consider breaking up the Big Four.
A number of politicians from several UK parties have also shown support for the Big Four to be examined by the Competition and Market Authority (CMA) as to whether they should be broken up.
At the Labour party’s State of the Economy conference held on 19 May, the shadow chancellor John McDonnell said that the party will be commissioning a review of the profession in the UK describing the Big Four, alongside Grant Thornton and BDO, as a ‘cartel’ which prevents new market entrants.
It has also been reported that the Liberal Democrats Leader Vince Cable is writing to the UK’s secretary of state for business Greg Clark, to gain government support for the CMA to launch an inquiry into the Big Four. Cable was quoted as saying the challenge of breaking up the Big Four may be too big for the UK and that the European Commission should be approached for support.
The Select Committee also asked the UK’s transport secretary Chris Grayling if he was aware that EY was simultaneously advising Carillion at the same time as advising HS2, a multi-billion pound rail development project which awarded Carillion a contract, on the state of Carillion’s finances. The committee also asked Grayling if he thought this was a conflict of interest.
The Financial Reporting Council (FRC) was also criticised in the report and it is to undergo an investigation to assess if it is fit for purpose. The Panel for the inquiry has been selected by Legal & General, a UK insurer, chairman John Kingman and does not include any current executives of the Big Four. Despite this, the panel has already received some criticism from the media about being too close to the profession.