PracticeAuditBusiness review is auditor friendly

Business review is auditor friendly

Amendments to company law reform bill should make roles slightly less painful

Auditors may still be awaiting the big news on whether clauses in the company
law reform bill will go through with changes that allow proportional liability,
but other amendments have just been confirmed that should also make their roles
slightly less painful.

Following the very public and much criticised consultation over the scrapping
of the operating and financial review the government has, as expected, brought
in the minimum EU requirements on narrative reporting in the form of the
business review.

There are some alterations, such as bringing in the specific mention of
environmental issues, employees and social and community issues, but these can
still be left out of a business review as long as the company declares that it
has.

More importantly for auditors, the requirements placed on them by the OFR
have been removed, significantly reducing their exposure to risk from such
documents.

‘There will be an element of audit attached to the business review but not to
the same level as it was,’ said a DTI spokeswoman.

Auditors will continue to be required to report on the consistency of the
director’s report with the annual accounts, but ‘there will not be any
additional requirement to check for other inconsistencies that auditors may come
across in performing their role as auditor’.

The decision will not go down well in corporate social responsibility
circles, with many lobby groups hoping for some additional level of assurance on
the contents of a business review or OFR.

But DTI minister Alun Michael had stated that the audit requirements
associated with an OFR would have cost business £33m more than under a business
review.

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