Following the financial meltdown of a key government contractor in the U.K., Carillion Plc., legislators and professionals are discussing the breakup of the Big Four auditing firms. Such a drastic measure, however, would probably do less to increase the relevance of audits than a different change, also unpopular with auditors.
Carillion’s demise caused the debate because, as the construction firm grew increasingly reckless in taking on projects and using creative accounting, KPMG, one of the Big Four, remained its auditor for 19 years — and failed to alert shareholders and regulators of the impending disaster. At the same time, Deloitte served as Carillion’s internal auditor and EY had a consulting arrangement with it. PwC became Carillion’s liquidation…
