KPMG will phase out advisory work for its British accounting clients, marking a first for the "Big Four" firms trying to head off a possible break-up.

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The Competition and Markets Authority (CMA) is under pressure to consider separating out the audit and non-audit operations of KPMG, EY, PwC and Deloitte to make it easier for smaller rivals to expand and increase customer choice.

The Big Four check the books of nearly all of Britain`s top 350 listed companies, while at the same time earning millions of pounds in fees for non-audit work. Lawmakers say this raises potential conflicts of interest because they are less likely to challenge audit customers for fear of losing lucrative business.

Bill Michael, head of KPMG in Britain, told partners in a note on Thursday that it will phase out non-audit work for top audit customers, a step that will cut fees over time.

"We will be discussing this point with the CMA in due course," KPMG`s Michael said.

Non-audit work that affects audits would continue.

KPMG audits 91 of the top 350 firms, earning 198 million pounds ($259 million) in audit fees and 79 million pounds in non-audit fees, figures from the Financial Reporting Council show.PwC said there are already measures in place to control non-audit services to an audit client and that it looks forward to seeing the CMA`s analysis on how well they have worked.

"We appreciate that further commitments to limit non-audit services to audit clients could be necessary to promote confidence in the independence of audit firms, particularly for those companies in the listed market," PwC said in a statement.

Lawmakers want auditors to spell out more clearly a company`s prospects as a going concern.

Michael said that KPMG would seek to have all FTSE 350 companies adopt "graduated findings", allowing the auditor to add more comments about a company`s performance beyond the required minimum.

"Our intention is that graduated findings should become a market-wide practice," Michael said.

The CMA is due to complete a fast-track review of Britain`s audit sector by the end of the year. This was prompted by lawmakers looking into the collapse of construction company Carillion, which KPMG audited, and failures such as that of retailer BHS.

The watchdog could ask for specific undertakings, such as a limit on the number of FTSE 350 clients, or push ahead with an in-depth investigation if it felt more radical solutions are needed.

EY declined to comment and Deloitte had no immediate comment on whether they would mirror KPMG`s decision on UK non-audit work.

($1 = 0.7632 pounds)

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