Auditors on governance: 'We've been doing this for years'

The audit industry has put on a warm reception for the arrival of its first corporate governance code, which it says broadly codifies existing practice.

The major firms spent the last seven days preparing statements in anticipation of today’s release, which was welcomed.

Ian Powell, chairman and senior partner with PricewaterhouseCoopers, said the code will “effectively codify the way in which PwC’s governance structures currently operate”.

He conceded that the firm will have to appoint non-executive directors, but said “our thinking on how best to embrace this principle and its implications is well advanced”.

In the lead up to today’s release, the firms had complained about the difficulty of finding non-executive directors that meet independence criteria. With clients in all market sectors, across the globe, the firms foresaw a potential nightmare in tracking down non-executive directors who were independent enough to satisfy the code.

Scott Halliday, managing partner Ernst & Young UK & Ireland, said he supported “the principle” of appointing independent non-executives.

“We believe that they can make a valuable contribution to effective audit firm governance because they can bring different perspectives about the risks and opportunities an audit firm faces in the provision of high quality services,” he said.

John Griffith-Jones, senior partner with KPMG UK, said the code would largely codify the existing practices which had been put in place since the Enron scandal.

“The profession has reformed itself a lot since Enron and I think this proves and shows we have made the proper steps and here we are codifying all the things that we do and we are proud of,” he said.

Simon Michaels, managing partner with mid-tier firm BDO, said non-executive directors have been part of his firm’s structure for more than a year.

“We recognise that, if the code is to be successful in promoting choice in the audit market, we need to be open and transparent in our reporting of the practices we have in place to ensure we deliver high-quality audits,” he said.

Scott Barnes, CEO of mid-tier firm Grant Thornton, said with the economy under pressure, it is particularly important that the investment community has faith in the quality of auditors.

"Our practices are already in line with many of the Code's provisions and we have already begun the process of recruiting independent non-executives with suitable experience and expertise who will bring a useful external market perspective,” he said.

Further reading:

Wyman warns over non-exec restrictions