PracticeAuditAudit report: Govt backs away from mandatory rotation of firms

Audit report: Govt backs away from mandatory rotation of firms

Government has shied away from enforcing mandatory audit firm rotation but has left a door open for the Financial Services Authority to review the issue.

In a report from the government’s joint Department of Trade and Treasury working group on audit, ministers avoid a principle recommendation made yesterday by the Treasury select committee to requireing audit committees to review every five years whether they should keep their auditors.

The report, obtained by Accountancy Age ahead of a statement by trade secretary Patricia Hewitt, says: ‘We conclude that the case for mandatory rotation as a solution to the problems of auditor independence has not yet been made.’

However the report leaves the way open to reconsider the decision if evidence from the Ethics Standards Board and the FSA deem the move necessary.

‘We believe that there is a need to examine further the evidence and the arguments for and against mandatory audit firm rotation,’ said the report compiled by the Coordinating Group on Audit and Accounting Issues, set up in the wake of the collapse of Enron, the US energy giant.

The CGAA group has also passed over the issue of re-tendering to the ongoing review conducted by the ESB and the FSA.

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