Proposals from the Financial Reporting Council (FRC) to introduce substantial increases in the fines for financial misconduct by accountancy firms have come under strong criticism from the Big Four.

The FRC plans to introduce tougher penalties based on the size of a firm's turnover, and began a consultation on the issues in April. In their responses, the Big Four have described the proposals as 'irrational' and 'fundamentally misconceived', according to The Times.

The paper says PwC labelled the process of imposing higher fines simply because a firm was big as contrary to 'natural justice'. A spokesperson for KPMG said: 'Such an approach will have the inevitable consequence of imposing financial sanctions on the larger accounting firms that are disproportionate to the actual misconduct or breach.'

Ernst & Young claimed the new approach would not deter misconduct because most disciplinary cases involve honest misjudgments rather than recklessness or deceit. 'Such well-intentioned judgment errors are inherently incapable of being deterred by other fines,' the firm argued.

A Deloitte spokesperson said: 'We believe it is an irrational mechanism, leading to disproportionate, unfair and inappropriate sanctions.'

Mid-tier firms including Grant Thornton and PKF raised concerns that setting fines by turnover was unfair and could deter smaller firms from competing for large audits.

ICAEW said that the regulator had focused too much on financial penalties and ignored other sanctions, such as requiring firms to change their procedures or temporarily barring them from taking on new clients. It also warned that as many firms are partnerships - with fines being paid by partners themselves - younger accountants could be discouraged from becoming partners.

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