Regulator discusses non-audit restrictions
Auditing Practices Board releases consultation paper on non-audit work for audit clients
The accountancy watchdog has released a much anticipated discussion paper
which could pave the way for restrictions on accounting firms which undertake
non-audit work for audit clients.
The Auditing Practices Board’s (APB) release of the consultation paper will
reignite one of the most fiery regulatory issues in the audit industry, which
has been debated on and off, since before the Enron scandal.
The issue sparked debate in the week leading up to today’s release,
as
revealed by Accountancy Age last week.
The APB’s report follows a Treasury Select Committee investigation into the
banking crisis which recommended that “trust in audit would be enhanced by a
prohibition on audit firms conducting non-audit work for the same company.”
Non-audit fees, as a proportion audit work dropped to 71% in 2008 from 191%
in 2002 according to survey in
Financial
Director magazine.
Some have quietly observed the Big Four gradually disconnecting their
non-audit work from audit clients, in anticipation of eventual restrictions.
Others note that much of the work which falls under the non-audit label is
actually undertaken as a matter of course in a statutory audit.
Richard Fleck, Chairman of APB, said the issue has been debated since the
Enron scandal in 2002.
“Since then there have been a number of developments including greater
involvement by audit committees in overseeing what non-audit services are
provided, greater transparency on the fees paid for non-audit services and the
issuance by the APB in 2004 of Ethical Standards for Auditors which prohibit a
number of non-audit services from being provided in certain circumstances,” he
said.
“The aim of the APB Consultation Paper is to seek views, especially from
investors, on whether there is support for the Treasury Select Committee’s view
that investor confidence and trust in audit would be enhanced by a prohibition
on audit firms conducting non-audit work for the same company.”
In its consultation paper, the APB is asking whether the provision of
non-audit services by accounting firms impacts confidence in the independence of
auditors, and of any instances when the potential conflict has adversely
affected audit quality.
Read the full consultation paper:
APB
issues a Consultation Paper on audit firms providing non-audit services to
listed companies that they audit