The Financial Reporting Council (FRC) is currently drawing up guidelines for the separation of audit and consulting operations at firms including PwC, Deloitte, EY and KPMG.

The proposed changes to the industry include to “governance, leadership, financials and remuneration” within firms’ audit and consulting divisions, according to an individual briefed on the discussions.

The FRC would oversee the implementation of the new standards and would reprimand companies if they failed to meet the new systems. The changes would mark a radical change in operations of the firms in the UK, where they have around 70,000 members of staff.

The industry-driven changes would allow the sector to get ahead of any government-led changes within the industry, as officials are yet to decide on which actions to take in response to four government-commissioned reviews which published reports on the companies last year.

The reviews have proposed several different measures to improve choice and competition within the sector after criticism of the Big Four firms for not doing enough to spot problems at companies which have collapsed, such as Carillion and BHS.

The Big Four have also been criticised by MPS for focusing on profits while the quality of audits wained, The Times reports.

A spokesperson for the FRC said: “The FRC is in early discussions with the audit firms to understand their thinking on operational separation with a view to establishing some common principles to which we might hold them accountable.

“Our objectives are that the audit practices should be focused first and foremost on audit quality; and that they should be financially self-standing, with no structural cross-subsidies.”

In April 2019, the Competition and Markets Authority (CMA) called for a break-up of the Big Four in as part of a review of the audit sector. Many firms opposed the notion, including EY, which said that it “fundamentally disagreed” with a break-up of its business.

Yet, some firms have begun to implement changes to separate their audit divisions in anticipation for a government-forced break-up.

KPMG has moved hundreds of staff and an estimated 20 partners from its advisory division into its audit department whilst Deloitte has given final say on the pay and bonuses of its auditors to its non-executive directors in response to concerns about possible conflicts of interest between audit and consulting divisions.