Britain’s Big Four accountancy firms should be broken up following failings exposed by the collapse of construction giant Carillion, a damning parliamentary report has said.

KPMG, PwC, Deloitte and EY come in for severe criticism from MPs on the business and pensions committees, who conducted a joint inquiry into Carillion’s demise.

Their final report says the audit profession is undergoing a “crisis of confidence”, and the auditors’ tangled web of involvement in Carillion’s woes illustrates the need for a “more competitive market”.

Rachel Reeves, chairwoman of the BEIS Committee, said: “The auditors should also be in the dock for this catastrophic crash.

“The sorry saga of Carillion is further evidence that the Big Four accountancy firms are prioritising their own profits ahead of good governance at the companies they are supposed to be putting under the microscope.

“KMPG, PwC, Deloitte and EY pocket millions of pounds for their lucrative audit work – even when they fail to warn about corporate disasters like Carillion.

“It is a parasitical relationship which sees the auditors prosper, regardless of what happens to the companies, employees and investors who rely on their scrutiny.”

The MPs have called on the Competition and Markets Authority to examine a break-up of the Big Four.

Rachel ReevesRachel Reeves says auditors should be ‘in the dock for this catastrophic crash’ (Danny Lawson/PA)

The report pointed to audits carried out by Deloitte and KPMG, as well as EY’s advisory role and PwC’s multi-faceted jobs that involved Carillion’s pension schemes and its latest incarnation as special manager of the liquidation.

The Financial Reporting Council has gone as far as to open an investigation into KPMG over its audits of Carillion under the Audit Enforcement Procedure.

Professional services firms have pocketed a total of £71.6 million in Carillion-related work since 2008, including on its pension schemes, according to a separate report by the committees.

Carillion’s liquidation in January left a £900 million debt pile, a £590 million pension deficit and hundreds of millions of pounds in unfinished public contracts.

The role of auditors has come under the spotlight, with questions asked about why problems at the firm were not spotted sooner.

“If one member of the oligopoly is a company’s external auditor, the others can rely on providing other services, at all stages in a company’s life cycle, and rack up substantial fees whatever the result,” the report said.

“The Big Four collectively even benefit from mutual failure, as one of them will be invariably called in to advise on clearing up the mess left by the implementation of the previous advisers’ proposed remedy.”

A KPMG spokeswoman said: “We believe we conducted our audit appropriately.

“However it’s only right that following a corporate collapse of such size and significance, the necessary investigations are performed.

“Auditing large and complex businesses involves many judgments and we will continue to co-operate with the FRC’s ongoing investigation.”

She added that KPMG welcomes any future review of the profession.