PwC, Deloitte, Ernst & Young and KPMG Criticize FRC’s Proposals
PwC, Deloitte, Ernst & Young and KPMG (Big Four) have criticized the proposals that have been issued by the Financial Reporting Council with regard to increasing the fines in case an accountancy organization commits any sort of finance related misconduct.
The Financial Reporting Council is planning to bring up tough penalties that will basically depend on an entity’s turnover size. The Council has already started consulting others on this matter from April onwards. Responding to the proposals, PwC, Deloitte, Ernst & Young and KPMG stated that they are irrational and not conceived appropriately as far as fundamentals of accounting are concerned.
PwC stated that the process of implementing huge fines depending on the size of the firm was not appropriate. A spokesperson at KPMG mentioned that this type of action would only result in the imposing of finance related sanctions on bigger accounting entities which are basically disproportionate as far as actual breach or misconduct is concerned.
On the other hand, Ernst & Young was of the opinion that this move won’t put an end to financial misconduct as most of the discipline related cases include honest incorrect judgments instead of deceit or recklessness.
A spokesperson from Deloitte shared that such an approach was irrational and would result in unfair, inappropriate and disproportionate sanctions.
Even mid-sized entities such as PKF and Grant Thornton have clarified that they are not in favor of the fine amount being decided on the basis of a firm’s turnover. They stated that it was not fair and can discourage smaller entities from getting into competition for large audits.
According to ICAEW, Financial Reporting Council has given more attention to finance related penalties and have been ignorant towards other types of sanctions including, the need for making entities change their processes or barring them from acquiring new set of clients on a temporary basis. ICAEW also stated that given that many entities are in partnerships, if partners themselves give fines, then young accountants won’t be really keen to become partners.
FRC is responsible for the promotion of quality reporting and corporate governance, which further helps in fostering investment.
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