Brussels talks audit reform
THIS morning’s session at the Brussels conference on audit reform was interesting but went as expected. The investor contingent on the panel provocatively and vehemently asserted audit’s failure and the need for drastic change. Representatives from the big firms generously accepted the need for reform but suggested that it shouldn’t be as radical as some want while the regulator present, Stephen Haddrill from the UK’s Financial Reporting Council, attempted to tread a line somewhere between the two.
Actually, Haddrill seemed a litle coy at one stage. Asked to name the three “interventions” he would most like to make in audit regulation he stuck to his message that it was annual reports and transparency that needed addressing. He didn’t actually make it to three.
While the discussion was interesting there was little in it that was new and no way of knowing how much it might influence proposals for reform that will come from Michel Barnier, the internal markets commissioner later this year.
Perhaps the most interesting speaker was Jules Muis, former E&Y partner, vice president and controller of the World Bank and a former director general and chief internal auditor of the European Commission. Muis declared that the current audit model was “dysfunctional” and needed a “frontal labotomy”. He suggested the real choice,if the model could not be fixed, was doing away with audit for all but the systemically most important companies. And those audits need to be managed by government agencies, not the company board.
He went on to say that the role of the FD needed a “bazooka” taking to it as it was now fraught with conflicts because accounting and finance departments are expected to be profit centres. This he said was an “abomination”.
You always get value out of Muis.