Don’t be so defensive, FRC chief tells audit profession

by Richard Crump

More from this author

18 May 2012

  • Comments
stephen-haddrill-1

THE AUDIT PROFESSION has been overly defensive to criticisms levelled at it for its role in the financial crisis, according to the chief executive of the FRC.

The audit market is currently facing a series of inquiries by lawmakers in the UK and Europe investigating the structure of the market, the relationship between auditors and financial service regulators, and the way going concern and liquidity issues are assessed.

Speaking at the Auditing Special Interest Group (ASIG) Audit and Assurance conference in central London, Stephen Haddrill told delegates that the audit profession "would have more reason to be anxious" if the current inquiries were questioning the value of audit rather than the way it has been discharged.

Haddrill said the profession's defensive stance is not "necessary or appropriate" and added that when looking for assurance from boards over company numbers auditors should do so with a ‘sceptical eye'.

Addressing the European Commission's consultation into reform of the audit market, Haddrill said the FRC was supportive of increasing competition but not at the expense of audit quality.

"Some of the proposals put this at risk," Haddrill said in reference to the EC's intention to impose mandatory rotation of auditors on companies every six years.

Last month, the FRC announced audit tendering plans that signalled a notable split with the stance taken by the EC. Its latest proposals, which were already far less aggressive than the EC's, will require FTSE 100 and FTSE 250 companies - rather than the entire listed market as previously stated - to put their audit out to tender at least once every ten years.

Haddrill said he felt that "heavy hand" of mandatory six year rotation "runs the risk" of auditors' understanding of the risks and systems of the companies they are auditing becoming "weaker".

On the subject of corporate reporting - the FRC also announced a raft of proposed revisions to the corporate governance code aimed at enhancing the value of corporate reporting and audit - Haddrill said improvements in the reporting of risk at financial institutions still needs to be improved.

"To often the risks that keep boards awake are buried in reports," Haddrill said, adding that they are all too often "obscured by that banal legal requirement called boilerplate."

Visitor comments

blog comments powered by Disqus
display:none

Add your comment

We won't publish your address


By submitting a comment you agree to abide by our Terms & Conditions

Your comment will be moderated before publication

Submit
  • Send

conservatoire-for-dance-and-drama

Finance-Director-part-time

Conservatoire for Dance and Drama, London, Permanent, Part Time, £60,000 pro rata

 

 

Newsletters

Get the latest financial news sent directly to your inbox

  • Best Practice
  • Business
  • Daily Newsletter
  • Essentials

Careers

Search for jobs
Click to search our database of all the latest accountancy roles

Create a profile
Click to set up your profile and let the best recruiters find you

Jobs by email
Sign up to receive regular updates with the latest roles suitable for you

Briefings

budget-management

Why budgeting fails: One management system is not enough

If budgeting is to have any value at all, it needs a radical overhaul. In today's dynamic marketplace, budgeting can no longer serve as a company's only management system; it must integrate with and support dedicated strategy management systems, process improvement systems, and the like. In this paper, Professor Peter Horvath and Dr Ralf Sauter present what's wrong with the current approach to budgeting and how to fix it.

cchcover

iXBRL: Taking stock. Looking forward

In this white paper CCH provide checklists to help accountants and finance professionals both in practice and in business examine these issues and make plans. Also includes a case study of a large commercial organisation working through the first year of mandatory iXBRL filing.