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The main accountants in the UK are pushing ministers to remove the limit of fees to ESG for their auditors, a move that would diminish independence rules and help BIG Four companies increase their revenues.
Alan Vallance, head of the Institute of Authorized Accountants in England and Wales, told the Financial Times that work on checks of environmental, social and management should not be counted on to restrict the non -Vivita fees from which accounting companies are allowed from it their clients to audit .
Cap forbids accounting Companies than 70 percent of the audit fee for other work, such as counseling or tax advice, for clients whose financial accounts check.
The cap was introduced in 2016 as part of the EU measures to increase the independence of the auditor after concern that the profession became too comfortable with corporate clients. It is designed to ensure that the auditor’s desire to receive advisory fees from the company would not undermine their willingness to challenge management in the accuracy of their financial data.
In an interview, Vallance said he had invited Business Secretary Jonathan Reynolds and the Minister of Employment of Justin Madders to exclude audits of data on ESG companies from the types of work subject to CAP.
He also regularly asked this issue with Richard Moriarty, the CEO of Financial Reporting Council, which regulates the accounting and audit sector, he added.
Vallance said his organization had discussed with the main audit companies about the problem “individually and in common”, adding that they supported the approach of his organization. A person in one big four said groups wanted the drop to change “years”.
ESG insurance – checking information that companies publish about their social and environmental impact, such as their CO₂ – is a lucrative and growing line of work for accounting companies, and for other advisers who are not limited by the limit of compensation because they do not perform financial audits.
EU rules applying from this year require large companies operating in the block to obtain an independent check when publishing standardized data of this kind.
The FRC figures show that Big Four – Deloitte, Ey, KPMG and PWC – performed 40 percent ESG Audit of the FTSE 350 in 2023, and companies eager to increase the share. In comparison, companies ended the same year 88 percent of financial audits.
The time of the new EU rules would cause an increase in ESG’s work this year, creating a “huge opportunity,” said Vallance, whose largest company for members of the organization is a large four.
But he added that the UK companies were “unfavorable to European audit company”, which could include the job of ESG’s framework of their regular audit fees, while companies in the UK could not. “It’s really important for the UK PLC that is addressing,” he said.
European companies “cannot cope with demand” for the Audits of ESG, Vallance said, transferring surplus to British companies. But the rules in the UK have often prevented British companies from taking over the job, he said.
The Government of the UK singled out professional services as one of eight sectors that can stimulate economic expansion and pushed regulators to grow priority.
A long -awaited proposal for the Audit Act, intended for improvement of standards after the failure of high companies such as Carillion and Patisserie Valerie, could be a means of change.
Vallance also said that accountants were more qualified than other ESG counselors because of their training in checking the data published by the companies.
“Skills you learn to become an authorized accountant – objectivity, critical judgment, such types of things – are equally relevant[to ESG audits]. . . Our profession should be a profession, “he said.
Deloitte, Ey, KPMG and PWC refused to comment.
