Danny McCance 18 Feb 2019 11:23am

MPs demand Big Four hospitality records on FTSE clients

The Business, Energy and Industrial Strategy (BEIS) Select Committee has requested that the Big Four provide data for their spending on FTSE 350 audit clients over the past five years

The request comes as part of the committee’s ongoing inquiry into the future of the audit market.

Chair of the committee, Rachel Reeves MP, had previously requested the firms provide data on corporate expenditures from the past two years during the firms’ evidence session.

This request was expanded in a letter sent to Deloitte, EY, KPMG and PwC last week.

Along with the request for figures on how much the firms have spent on corporate hospitality for FTSE 350 clients, the committee wants information on how often these clients were hosted in the past five years.

It also wants to know how much the Big Four has focussed resources on prospective clients.

To do so it will also examine how much was spent on corporate hospitality for FTSE 350 businesses that were not clients five years ago but have since become clients, as well as the number of times they were hosted.

The letter requested to know how many hospitality and entertainment events clients new to the firms in the past five years were invited on before they became a client.

The committee also wanted to know about fees, in particular what percentage of FTSE 350 clients have cost the firms more than 10% of their original budgets in the past five years.

It asked how the firms took these up with the audit committee and in how many instances the firms successfully renegotiated fees.

The Big Four have also been asked to provide information and examples of how staff renumeration and progression might be affected by audit quality issues.

Pay ratio reporting was also addressed, with Reeves asking the firms provide any information they had about it regarding gender and BAME (black, Asian and minority ethnic) individuals, and pushing them to confirm whether they will publish this information next year.

In October last year, reports found the Big Four had signed up to the Race at Work Charter, a government charter committing businesses to help drive recruitment of BAME employees.

The firms have been given until the 27 February to provide the information.

The inquiry into the future of the audit market has previously examined barriers of entry faced by smaller firms in the market.

Last year, Reeves stated that a “lack of meaningful competition [in the market] has bred conflicts of interest at every turn”.

 A spokesperson for EY said that the firm “is committed to taking an active part in all current reviews into the audit market and will continue to respond to information requests from the BEIS select committee”.

KPMG declined to comment. Deloitte and PwC have been contacted for comment.

Audit watchdog the Financial Reporting Council is set to publish its own hospitality register, revealing details of gifts, dinners and other activities provided to its officials after being accused of having a cosy relationship with Big Four firms.

HMRC has been publishing its hospitality registers for over a decade. In 2017, the Revenue disclosed that Big Four firm PwC paid for a dinner for chief financial officer Justin Holiday and Microsoft paid for a lunch with HMRC’s commercial director.