The UK's big four accountancy firms could be broken up to separate their auditing and business advisory businesses, according to a group of MPs.
Deloitte, EY, KPMG and PwC conduct 97% of company audits in the UK, but also provide business advisory services.
The Competition and Markets Authority (CMA) has recommended an internal split between auditing and advisory services. But now, the Business, Energy and Industrial Strategy (BEIS) Committee, says they should be forced into a full-scale structural split.
It comes after several high-profile company collapses, which were audited by the big four. Most notably are Carillion and Patisserie Valerie which was audited by KPMG. And now, the Financial Reporting Council (FRC) has announced it is investigating KPMG's audit of Carillion.
In its report, the BEIS committee said a structural break-up would "prove more effective in tackling conflicts of interest".
Rachel Reeves, the chair of the committee, said: "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."
The committee also recommended a pilot scheme for joint audits on complex organisations, which would allow smaller companies to compete.
Michael Izza, chief executive of the Institute of Chartered Accountants in England and Wales (ICAEW), praised most of the suggestions made by MPs, but said: "We are concerned that some of its ideas for reducing conflicts of interest, such as the break-up of the largest multi-disciplinary firms, might prove counter-productive.
"This could both drive out incumbents and discourage new entrants and it would be unfortunate if an attempt to guarantee the independence of audit firms ended up undermining the resilience of the audit market."
Deloitte's UK managing partner for audit, Stephen Griggs, said: "We welcome many of the [BEIS Committee] recommendations, including extending the scope of the audit and better regulation of audit, but we have concerns about a potential structural split.
"This will be detrimental to audit quality and could materially damage the UK's competitive position as a leading capital market."