The objectives of operational separation are to ensure that audit practices are focused on delivery of high-quality audits in the public interest and do not rely on cross subsidy from the rest of the firm.  The desired outcomes include:

• Audit practice governance that prioritises audit quality and protects auditors from influences from the rest of the firm that could divert their focus away from audit quality;
• The total amount of profits distributed to the partners in the audit practice does not persistently exceed the contribution to profits of the audit practice;
• The culture of the audit practice prioritises high-quality audit by encouraging ethical behaviour, openness, teamwork, challenge and professional scepticism/judgement; and
• Auditors act in the public interest and work for the benefit of shareholders of audited entities and wider society.

The FRC has asked the Big 4 firms to agree to operational separation of their audit practices on this basis and to provide a transition timetable to complete implementation by 30 June 2024.

Please click for the press release on the FRC website and the Deloitte press release.