The building of the auditing and consulting firm KPMG in London
Image: dpa
Britain is learning lessons from the Carillion scandal and tightening scrutiny of companies and auditors. A German accountancy specialist welcomes the new rules against fraud in companies.
mfe./ppl. Frankfurt/London ⋅ The British government has published stricter rules for the auditing of large companies. The reform aims to reduce the dominance of the big four accounting firms Deloitte, EY, KPMG and PWC. At the same time, it should draw red lines against test failure. In recent years, accounting scandals such as the sudden collapse of the construction company Carillion or the department store chain BHS have shaken the confidence of investors, despite previous positive audit decisions. “Crackdowns like Carillion have made it clear that auditing needs to get better and with these reforms the UK will set a global standard,” announced Economics Secretary Martin Callanan, responsible for the reform, in London on Tuesday.
The most important points are new supervisory and control rules, an extension of the regulations to non-listed companies and a parallel examination by smaller companies alongside the “big four”. In place of the previous Financial Reporting Council (FCR), a new supervisory authority called ARGA with extended sanctioning powers is being created. This will not only oversee all 350 companies in the FTSE 350 stock market index, but all companies with more than 750 employees and more than £750m (€880m) in revenue. Managing directors who cheat in accounting should be punished directly by ARGA. There are also stricter rules so that companies on the brink of insolvency are no longer allowed to pay dividends.