The Treasury Committee’s uncompromising report on Northern Rock did not limit its criticism of assurance at the bank to auditors PricewaterhouseCoopers.

The scope of the comments went far beyond PwC’s work at Northern Rock, and cut right to the heart of the UK audit system itself.

The MPs called for professional bodies and regulators to take a completely fresh look at the assurance auditors should be able to offer for company risk management and highlighted the ‘conflict of interest between the statutory role of the auditor, and the other work it may undertake’.

But is tougher regulation really the way to prevent another Northern Rock? Is the entire audit system really in need of such a stern re-examination?

Jon Grant, executive director of the Financial Reporting Council’s Auditing Practices Board, is not so sure. ‘Guidelines on auditing internal controls and risk management are outlined in the Combined Code, which applies to all listed companies. It is a principles-based approach, it was consulted on widely, it has since been reviewed and what is clear is that there is no appetite for US-style regulation,’ Grant says.

He is equally adamant that the framework for avoiding auditor conflicts, particularly in the financial services sector, highlighted by the Treasury Committee, is in place and robust.

The Financial Services Authority has the power, where it sees fit, to hire an independent auditor to report on a financial institution. If there is a suggestion of an auditor conflict, the FSA has the power to do something about it.

‘The mechanisms are in place. After Enron we consulted on this question of auditor conflicts of interest and there was no appetite for a blanket ban on non-audit services. We have a laser gun which is much better than a nuclear bomb,’ says Grant.