The Anticipated Shift In The Professional Services Landscape

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The Anticipated Shift In The Professional Services Landscape

The ‘Big Four’ accounting firms — Deloitte, EY, KPMG and PwC — have long been titans in the professional services industry. With their extensive global reach and influence, they play a crucial role in auditing, accounting and consulting for a broad range of clients, ranging from multinational corporations to government entities. However, concerns about their dominance, conflicts of interest and the potential impact on market competition have led regulatory bodies and policymakers to consider measures aimed at restructuring.

In July 2020, the UK’s Financial Reporting Council (FRC) issued an operational separation directive with a final deadline of July 2024, which the Big Four have agreed to meet. The separation directive aims at improving audit quality by ensuring dual roles and independence of the audit and advisory services, distinct governance and leadership, and operational autonomy, to ensure that audit practices are focused on delivering high-quality audits in the public interest and reinforcing market resilience.

The directive is a significant step by the FRC to address longstanding concerns regarding the dominance and practices of the Big Four. However, industry responses have been varied, with some welcoming the move as a positive step towards enhancing audit quality and independence, while others raise concerns about the practicality and unintended consequences of the operational separation – such as regulatory arbitrage and cross-border challenges. Successful implementation of the directive hinges on collaboration between regulators, the firms themselves, and stakeholders affected by these changes. Verdantix is monitoring how the Big Four navigate these new requirements and unveil their plans to adapt structures and operations to comply with the FRC's directive in 2024.

As these professional firms work towards complying with new regulations, the industry within the UK is prepared for transformation that will impact the global outlook. Balancing the need for increased independence in auditing with maintaining a firm's ability to deliver comprehensive services remains a delicate task for the Big Four. The outcomes of compliance with this directive will undoubtedly shape the landscape of the professional services industry and have far-reaching implications for auditing standards and market competition. Keeping a close eye on how these changes unfold will be crucial in understanding the long-term impact on the industry and its stakeholders. To learn more about the risk consulting market, please see Verdantix Market Perception Trends: Risk Consulting Providers 2023.

Industry Analyst

Elizabeth is an Industry Analyst in the Verdantix Risk Management practice. Her current research agenda focuses on enterprise risk management, risk management information systems, organizational and strategic resilience, and global risk management trends. Prior to joining Verdantix, Elizabeth worked in corporate risk management roles across the financial and tech industries, where she gained hands-on experience of executing risk management strategies. She holds an MBA degree with a specialty in finance from the University of Lagos.