AUDIT REFORM proposals enjoy mixed support among audit committee chairs, as many question the rationale behind the measures and argue UK audit is the best in Europe.
More than one-fifth (22) of FTSE 100 audit committee chairs were questioned by Brunswick Research on behalf of the ICAEW.
The majority called for greater competition – ideally a Big Five or Six – more obvious independence in the auditor-client relationship, greater transparency and improved understanding of the function of audit outside the profession.
Of the European Commission’s leaked reform proposals, chairs were most averse to audit-only firms, saying this would depress quality and could lead to major competitors exiting the market.
Joint audits were also unpopular, with one respondent warning of a “massive chance of miscommunication” and more work for companies.
Mandatory rotation and tendering engendered a mixed reaction, with the latter more popular, but audit committee chairs willing to consider a compromise.
“I personally would think that mandatory tendering as opposed to rotation is adequate, but would I throw up my hands in horror at mandatory rotation? No.”, said one.
Unsurprisingly, audit committee chairs pointed to improvements that have already been made – such as the reduction of non-audit services fees as a proportion of audit fees – and professed themselves open to change.
They called on regulators to recognise the limitations of audit, understand and clearly delineate the audit committee’s role and examine accounting standards rather than audit quality.
However, they admitted their experience of tendering is low, saying audits are rarely put out to tender due to cost, complexity and satisfaction with incumbent auditors.
Increasing competition from Group A firms is respondents’ main priority, as well as boosting transparency and communication on the audit process.