Plan To Breakup The Big Four

The UK audit regulator has outlined the plan to breakup the Big Four accounting firms in letters sent to the leaders of Deloitte, EY, KPMG and PwC. In what would amount to a far-reaching shake-up of the accounting industry, the Financial Reporting Council (FRC) issued guidelines for the big four to separate their audit and consulting operations in Britain.

Plan to Breakup the Big Four
Plan to Breakup the Big Four

Plan to Breakup the Big Four

The move comes almost a year after the competition watchdog recommended that the British government legislate to force the firms to split audit from consulting roles amid concerns about their dominance and conflicts of interest in the scandal-hit industry, reported Financial Times.

But with no signs of imminent legislation from ministers, the FRC is pressing the firms to embark on a voluntary break up as part of efforts to improve the quality in auditing. The FRC wants the firms to make their audit operations financially independent businesses, with separate boards led by independent chairs.

It said there should be a ringfencing of audit costs and profits, and the partners in these businesses should no longer be remunerated from a shared pool of earnings that involved firms’ consultants or tax advisers.

The FRC is due to be replaced by a stronger regulator called the Audit, Reporting and Governance Authority, which is expected to have powers to force a break-up of the big four.

Also read: How Deloitte covered-up IL&FS Scam

Big Four’s Empire 2.0

The Big Four include the consultancy firms KPMG, Ernst & Young (EY), Deloitte and PricewaterhouseCoopers (PwC). Together they audit 99% of the companies in the FTSE 100 and 96% of the companies in the FTSE 250 Index, an index of the leading mid-cap listing companies, dominating the entire audit market. In other words any and every instance of large scale corruption goes through their supervision.

It was reported in 2012 that at least 21 trillion dollars of worldwide ill-gotten money of their elite clients was hidden away by the Big Four in tax havens. The impact of this swindling on Indian economy and the subsequent Indian response can be read in our report – the Global War on Cash: Target India.

In a nutshell, the Big Four accounting firms are responsible for the creation of the Tax Haven ecosystem in the former British colonies from where corruption money from around the world is laundered and funneled into Inner London – the elaborate setup widely known as Empire 2.0 also known as the Deep State.

Round-Tripping Black Money as FDI

It is through this tax havens that corruption money accumulated through decades from working Indians is routed back into India as Foreign Direct Investment. This phenomenon known as ‘Round Tripping’, one of the leading puzzles related to cross border flow of investment is India’s biggest scam. According to international watchdog Global Financial Integrity, India is a parking spot for around USD 101 billion illegal inflow of funds. Although this is a very conservative figure.

Return of the East India Company

In the late 90s secret meetings took place in London where the blueprint for the ‘development’ of an entire Indian state was envisioned. Called Vision 2020, the scheme was the brainchild of an American consultancy firm born out of US military – McKinsey. It was supposed to be a role model and exported to other states of India and later to the entire developing world. Although amidst widespread opposition the people of Andhra Pradesh destroyed this ‘world’s most dangerous economic experiment’ dubbed at the time as ‘the Return of the East India Company’.

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