About six months ago, representatives from some of the largest UK investment
bodies were fighting tooth and nail to ensure that the true and fair view audit,
previously the cornerstone of UK auditing practice, did not disappear from
A hard fought campaign eventually saw the investors emerge victorious. Now a
new battlefront has emerged. Investors claim that the profession is once again
trying to drastically limit its exposure to liability claims, this time over the
issue of companies keeping proper books and accounting records.
Amendments to the company law reform bill proposed by opposition Treasury
spokeswoman Baroness Noakes last month would, the investors claim, significantly
reduce the auditors responsibility to check that a company keeps sufficiently
accurate day-to-day records on its activities. Ironically, it would mean that
the auditors’ duty was solely focused on judging the true and fair view of the
The problem is, they argue, that the accounts of a company may give a true
and fair view on the financial position of a company, but the accounting records
and returns could still be in disarray.
Such problems with records have been the basis of many an accounting scandal
over the years, such as those at Parmalat and Barings, and the amendments would
distance auditors from any responsibility in such cases, it is feared.
It seems that the investors will not have to fight so furiously over this
one, however. While some of the amendments proposed by Baroness Noakes were
taken into consideration, government whip Lord McKenzie of Luton seems to have
the measure of the potential implications of the changes and has so far proved
quite resistant to them.
For her part, Baroness Noakes told Accountancy Age that the concerns of
investors had not been made known to her.
But that won’t stop investors from pressuring the government to ensure that
this matter doesn’t slip through the net. Concerns over the erosion of audit
quality are high, despite initiatives like the audit quality forum aimed at
improving the service provided to shareholders.
Further talks between the two parties may be necessary in order to resolve
any outstanding conflicts.
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