MPs on the Business, Energy and Industrial Strategy Committee want to see audit and non-audit businesses separated at Deloitte, EY, KPMG and PwC.
The big four audit 97% of major public companies.
Committee chair Rachel Reeves said: “The ‘Big Four’s’ dominance has fostered a precarious market which shuts out challengers and delivers audits which investors and the public cannot rely on.”
“For the big firms, audits seem too often to be the route to milking the cash-cow of consultancy business.
“The client relationship, and the conflicts of interest which abound, undermine the professional scepticism needed to deliver reliable, high-quality audits.
“Splitting audit from non-audit business would be a big step to boosting the culture of challenge needed to deliver high-quality audits.”
The report highlights the reporting and audit failures that brought down Carillion including “the imprudent payment of dividends out of optimistically booked, and, in hindsight, unrealised, profits.”
Reeve said: “We must not wait for the next corporate collapse. Government and regulators need to get on and legislate to deliver these reforms and ensure that audits deliver what businesses, investors, pension-holders and the public expect.”