This is the first sign that the Enron collapse, which has already seen US auditors pledge themselves to improving standards, could have serious implications for the UK profession.
Failures like Enron, Independent Insurance and Equitable Life mean the Foundation, established to end decades of self-regulation in the accountancy profession, has been forced to bring its examination of auditor standards in the UK forward by at least two or three years.
Responsibility to review previous inquiries and conduct new examinations will fall to the Foundation’s new Ethics and Standards Board headed by Robert Charlesworth.
Charlesworth, acting executive director, said: ‘There is no doubt by a mile and a half that the hot topic is auditor independence.’
But, he warned against simply ‘shuffling the deckchairs’. ‘There’s a lot of work to be done. The accountancy profession will have to look at the changes and the Foundation will have to decide if sufficient work has been done to lead to substantive changes,’ he added.
On the whole, the profession agrees that changes need to be made to restore confidence in the audit process which has been severely dented over the past years. But, so far little of substance has been achieved.
Attention has increasingly focused on the rise in fee income, particularly among the Big Five, from non-audit services. All the FTSE-100 were audited last year by a Big Five firm. Many companies also paid for advisory services from the same firm.
Colin Reeves, director of the Foundation?s review board, the body that will oversee the ESB, confirmed it is to prioritise auditor independence in 2002/03.
The decision is also timely following the international drive to update guidance on ethical standards, particularly those related to the integrity of auditors. Both the European Commission and the International Federation of Accountants are due to publish proposals soon.
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