Audit committees must get tough

Link: Thumbs down for auditor rotation

A report carried out by Sir Robert Smith, chairman of engineering company, the Weir Group, demands an improved status for audit committees, and stresses their role in protecting the interests of shareholders, the Financial Times reported today.

The report, which is due to be published Monday, was commissioned by the government and should lead to revisions to the best-practice code on corporate governance.

‘If things go wrong, the audit committee also has a role in ensuring that they are put right – for example, if an audit failure seems to be leading to poor or even deliberately misleading financial reporting decisions,’ the report says.

‘This can put the committee into an adversarial relationship with both the external auditors and the executive, and audit committees must be ready to accept that role if necessary.’

A separate study by the veteran investment banker, Derek Higgs, on how to improve the quality of non-executive directors will appear at the same time.

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