EY announces UK audit oversight boardby
EY has established an independent oversight board as part of its plan to split its audit and consulting arms.
A new committee of independent non-executives will now set auditors’ pay, EY said in a statement.
All Big Four firms made a voluntary agreement with the Financial Reporting Council (FRC) last year to separate auditing from the consulting side of the business by 2024.
The other three firms that make up the top quartet, Deloitte, KPMG and PwC, have already created their own independent audit boards.
A series of high-profile corporate scandals led to three overlapping government-backed reviews into the audit sector. It was recommended that the largest players wall off their audit and consulting arms to increase competition but also to stop conflicts of interest between the two parts of the business, which had become a flash point for critics.
EY is currently facing multiple investigations by UK regulators relating to audit practice.
The FRC’s audit separation plan was drawn up in response to ensure audits “do not rely on persistent cross subsidy from the rest of the firm”.
The board will monitor compliance with FRC guidance on the overseeing of audit partner pay, which should be based on the quality of work rather than linked to sending business to other parts of the company.
The new UK Audit Board accompanies EY’s Public Interest Board (formerly known as the Independent Oversight Committee) which provides oversight of the management and supervision of the whole EY firm in the UK.
The Public Interest Board will be chaired by Tonia Lovell, one of EY’s existing independent non-executives, and will include David Thorburn and Sir Peter Westmacott (also existing independent non-executives) and Mridul Hegde.
Hegde has been an independent non-exec director at HSBC UK and chair of its risk committee since 2018.
Philip Tew has also joined the board as a non-executive director. He is currently a non-executive director and chair of the government, audit and risk committee for Quilter Cheviot, and is an ex-senior audit partner at PwC.
“The appointment of our new independent non-executives and the creation of our UK Audit Board support our focus on delivering the highest levels of audit quality by building a culture of challenge and strengthening oversight,” said EY UK chair Hywel Ball. “Combined with our sustained investment in audit quality, we hope these measures will continue to build trust and confidence in UK audit.”