PracticeAuditFRC releases discussion paper on audit ownership

FRC releases discussion paper on audit ownership

FRC has released its discussion paper on the impact of changes to audit firm ownership rules

The
Financial
Reporting Council
(FRC) released its anticipated discussion paper yesterday
on the possible impact of changes to audit firm ownership rules, and launched a
consultation process on the use of audit firms from more than one network. This
was part of its latest progress report on the recommendations of the Market
Participants’ Group (MPG) on actions to enhance the efficiency of the market for
audit services to big UK companies.

The discussion paper considers a number of issues on audit ownership,
including ease of entry and the potential for mid-sized firms to gain market
share; potential impact on audit quality from the introduction of outside
capital to audit firms; impact of the introduction of outside capital on the
supply of auditors with appropriate skills and personal qualities; and possible
decline in audit quality from conflicts of interest associated with a firm’s
ownership.

The consultation provides draft guidance on circumstances influencing a
group’s decision to use one, or more than one, audit network and lists some
issues for company audit committees to consider in assessing the group’s audit
arrangements. Responses to both the discussion paper and the consultation are
sought by August 1.

The progress report on the MPG’s 15 recommendations details work carried out
over the past six months as well as international developments which could
contribute to the objectives of the recommendations.

Further reading:

FRC to kick-start ownership debate

Audit costs are set to rise dramatically, FRC warns

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