The CMA recommendations for audit reform are finally published
Legislation proposed to impose joint audit and separate audit from consulting services, among other measures
Legislation proposed to impose joint audit and separate audit from consulting services, among other measures
The Competitions and Markets Authority (CMA) has published a paper on audit reform proposing a raft of measures to make the system more independent and improve the quality of audits.
Following public scandals including the collapse of Carillion and the discovery of fraud at Patisserie Valerie, there has been widespread clamour for reform.
The CMA launched a market study in October. This identified a number of reasons why audit quality has been falling short:
Most companies involved in the audit market, including the Big Four themselves, have made public statements on the changes they think should be made.
KPMG, Deloitte and PwC have all given their backing to proposals to separate audit from other services which a firm can offer.
“Addressing the deep-seated problems in the audit market is now long overdue,” said CMA chairman Andrew Tyrie.
“Most people will never read an auditor’s opinion on a company’s accounts. But tens of millions of people depend on robust and high-quality audits.
“If a company’s books aren’t properly examined, people’s jobs, pensions or savings can be at risk.”
The report will now go out for consultation. But Tyrie said the CMA plans to “persist until the problems are addressed” if it turns out the proposals are not far-reaching enough.
He said the “intractable problems” may take some years to sort out.
Sir John Kingman is also set to release a report examining the shortcomings of the current audit regulator, the Financial Reporting Council.