APB unveils auditor independence plans
UK auditors will have to adhere to tougher rules on audit independence under a reform package to be announced by the Auditing Practices Board tomorrow, Accountancy Age has reported.
In a move that follows the controversial crackdown on US firms by the SEC, the board is expected to unveil a raft of proposals aimed at tightening up rules for UK audit firms.
The body is keen to show it is responding to the increased public and regulatory focus on auditor objectivity following revelations last year of widespread infringements of independence rules in the US by firms such as PricewaterhouseCoopers.
Officials at the APB, responsible for auditing standards in the UK, refused to reveal details of the crackdown ahead of an announcement tomorrow.
But in what are expected to be the most significant changes to auditing rules, Accountancy Age understands the APB is set to require auditors to report on their own independence.
Firms are also expected to be told to undertake an independent review of their audits of listed companies before audit reports are published.
The new rules are likely to be less draconian than any instigated by the Securities and Exchange Commission which is holding hearings on the subject in Washington this week.
Big Five firms, particularly KPMG, have been campaigning against SEC pressure on firms to split their audit business from other lines of business.
PwC and Ernst & Young have already decided to spin off their consultancy arms.
However, the APB has historically avoided being ‘over-prescriptive’ on such issues, emphasising that auditors need to act in ways appropriate for the particular business entity they are dealing with.
Most other UK bodies are also taking a more relaxed approach to auditor objectivity.
An English ICA report last month found the independence concerns revealed by the SEC had not been repeated by member firms. And both accounting bodies and the government appear unconcerned by the slow progress in setting up an independent regulatory regime for accountants, which was due to launch at the beginning of the year. It is expected to take control of the APB.
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