The Financial Reporting Council (FRC) released its anticipated discussion paper yesterday on the possible impact of changes to audit firm ownership rules, and launched a consultation process on the use of audit firms from more than one network. This was part of its latest progress report on the recommendations of the Market Participants’ Group (MPG) on actions to enhance the efficiency of the market for audit services to big UK companies.
The discussion paper considers a number of issues on audit ownership, including ease of entry and the potential for mid-sized firms to gain market share; potential impact on audit quality from the introduction of outside capital to audit firms; impact of the introduction of outside capital on the supply of auditors with appropriate skills and personal qualities; and possible decline in audit quality from conflicts of interest associated with a firm’s ownership.
The consultation provides draft guidance on circumstances influencing a group’s decision to use one, or more than one, audit network and lists some issues for company audit committees to consider in assessing the group’s audit arrangements. Responses to both the discussion paper and the consultation are sought by August 1.
The progress report on the MPG’s 15 recommendations details work carried out over the past six months as well as international developments which could contribute to the objectives of the recommendations.
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