The UK’s accounting regulator has expressed concerns about the increasing reliance of the Big Four audit firms on offshore teams to conduct complex work for UK clients. The Financial Reporting Council (FRC) highlighted that firms are moving beyond using overseas staff for routine tasks to involving them in work requiring professional judgment as part of “extended team models.”

These global accounting firms—Deloitte, EY, KPMG, and PwC—have developed substantial offshore operations over the past decade, particularly in India, to reduce costs, access skilled professionals, and provide continuous service. This approach has also been adopted by mid-tier audit firms facing tight labor markets for qualified accountants. According to KPMG’s most recent transparency report, approximately 25% of its UK audit practice employees are based offshore.

Auditors within these firms have voiced concerns regarding the increased dependence on offshore teams and questioned the quality control of such work. The FRC cautioned that firms must “future-proof” against risks associated with offshoring and announced it will monitor how these “extended team models” are managed by the largest firms over the coming year.

In its annual audit quality report released alongside these remarks, the FRC also raised issues about UK firms’ ability to oversee their international networks effectively. Most major accounting networks consist of national partnerships owned and managed independently by senior partners in each country, coordinated under a global umbrella structure.

The report noted instances within PwC’s UK business where overseas member firms performed non-audit services for audit clients without securing the required UK approvals. PwC is currently conducting a detailed internal investigation to identify any additional breaches. Under UK regulations, accounting firms cannot charge fees for non-audit services—such as consulting or tax advice—that exceed 70% of the audit fee charged to the same clients. The FRC stated it will prioritize scrutiny of PwC’s approval processes for non-audit services delivered through its network firms via targeted supervisory engagements. PwC acknowledged the issue, stating it has raised it to a higher priority internally.

A source familiar with PwC’s efforts disclosed that the firm is investing heavily in improving its monitoring capabilities across network member firms to detect risks more rapidly as part of a broader international restructuring.

The FRC’s concerns echo past regulatory actions in other jurisdictions. US authorities have previously sanctioned Big Four firms, including KPMG, for inadequate supervision of their global networks, underscoring ongoing challenges in maintaining audit quality and regulatory compliance in an increasingly globalized profession.