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The UK’s top accounting firms are pushing to end the practice of regularly “naming and shaming” companies under investigation by the industry regulator, after the financial watchdog abandoned a similar plan following protests from banks.
The big four of Deloitte, EY, KPMG and PwC have discussed a coordinated effort with mid-tier firms such as BDO, Grant Thornton and RSM to file a complaint with the Financial Reporting Council over its policy of publicly announcing investigations, according to four people familiar with the matter.
The push – which also included complaints from firms Forvis Mazars & Crowe and professional bodies ICAEW and ACCA – was launched by a consultation published by the FRC in October and was due to close on Friday.
The sector has welcomed the regulator’s proposals to speed up resolution of some inquiries into audits, allow companies to conduct their own reviews under FRC oversight in some cases and introduce higher thresholds for initial investigations.
But the consultation makes no changes to the watchdog’s existing practice of announcing when an investigation begins or the length of the investigation, which companies have said could stress key audit partners and keep them tied up for longer periods of time.
When announcing an investigation, the FRC typically discloses the audit firm, the audited company, and the year under review, often making the signing audit partner identifiable.
“The initial publicity that the FRC is doing… is outside the scope of proportionate regulation,” said a person familiar with the lobbying effort. “There are situations where early disclosure is important to protect the market, but it should not be the default.”
Last year, after a major backlash from the City of London, the Financial Conduct Authority scrapped plans to name and shame more companies in its investigation.
The FCA had argued that the changes would bring it into line with the FRC and the Serious Fraud Office. But the financial watchdog abandoned the plans amid concerns they were driving businesses abroad at a time when the government is trying to boost economic growth.
Some companies argue privately that the FRC should identify audit firms only when particularly serious misconduct is ultimately found, while others say that naming should only happen at the end of the investigation, once violations have been established.
Another option being put forward by the industry would be to avoid naming the audited company to prevent publication of the identities of individual partners.
The FRC said in a statement that while it “welcomes the strong engagement”, it cannot comment on consultation responses before they have been submitted.
It added: “We make clear in the consultation document that we will consider reviewing our publishing policy, which will of course be inspired by the feedback we receive during this process.”
It was “very rare” to name any individuals when an investigation was launched, the FRC said, noting that investors “reasonably expect… strong enforcement action… where serious or significant failings occur”.
According to the regulator’s policies, an investigation is initiated if preliminary inquiries give the FRC “reasonable grounds to suspect” or if sufficient information “raises questions” about an audit code violation.
ACCA declined to comment on the consultation, but said it “broadly supports” the proposals, which “provide a proportionate and practical alternative to traditional enforcement routes”.
BDO, Deloitte, KPMG, RSM, Grant Thornton, Forvis Mazars and ICAEW declined to comment. EY, PwC and Crowe did not immediately respond to requests for comment.
The FRC has responded to pressure from successive governments to eliminate “anti-growth” regulations, shifting to a more industry-friendly approach since Richard Moriarty became chief executive in 2023.
In that time, senior figures associated with the FRC’s hardline stance have left, including Elizabeth Barrett, former head of dispute resolution at law firm Slaughter & May.
The watchdog’s latest consultation follows a separate consultation on its audit supervision strategy in August last year, which also focused on offering more “proportional” options.
