The UK’s accounting regulator has expressed concern about the increasing reliance of the Big Four audit firms on offshore teams to conduct complex audit work. The Financial Reporting Council (FRC) highlighted that firms are expanding the use of so-called "extended team models," where overseas staff are involved not only in routine tasks but also in activities requiring significant professional judgment.

The Big Four — Deloitte, EY, KPMG, and PwC — have developed sizable offshore operations, particularly in India, over the past decade. These arrangements aim to reduce costs, tap into skilled labor pools, and provide continuous service across time zones. The practice has also spread to mid-tier firms as the demand for trained accountants in the UK remains high. According to KPMG’s latest transparency report, roughly 25% of its UK audit workforce operates offshore.

Two auditors within Big Four firms interviewed independently described an increasing dependence on offshore teams, with some expressing doubts about the quality and consistency of work produced outside the UK. In response, the FRC emphasized the need for firms to "future-proof" their practices against risks associated with offshoring and indicated it will closely monitor how the largest audit firms manage these extended team arrangements over the coming year.

The regulator’s annual quality report also raised issues regarding UK firms’ capacity to effectively oversee activities conducted by their international affiliates, which are typically structured as separate national partnerships. Notably, the report revealed that PwC’s UK business had identified a small number of instances where overseas member firms performed non-audit services for audit clients without obtaining the necessary approvals mandated in the UK. PwC is undertaking an internal review to assess the scope of potential breaches.

UK regulations impose strict limits on fees for non-audit services provided to audit clients, capping these charges at no more than 70% of the audit fee. The FRC stated that it intends to prioritize supervisory scrutiny of PwC’s compliance systems related to non-audit work in its network through "targeted" conversations. PwC acknowledged the issue and said it would elevate addressing the matter to a higher organizational priority.

An individual familiar with PwC’s response mentioned that the firm is making significant investments to enhance its monitoring capabilities across member firms to identify and mitigate risks more quickly. This effort is part of a broader international reorganization within PwC.

This scrutiny of offshore audit work and network oversight follows earlier actions by U.S. regulators, which have previously sanctioned firms such as KPMG for inadequate supervision of their international networks. The FRC’s steps underline ongoing regulatory efforts to maintain audit quality and ensure robust governance as accounting firms increasingly operate across global boundaries.