PracticeAuditCommons hears call for auditor independence

Commons hears call for auditor independence

Two Labour MPs have renewed their attack on accountants selling non-audit services to companies they audit, following the Enron collapse involving Andersen.

Great Grimsby MP Austin Mitchell and Newcastle Central’s Jim Cousins put down an Early Day Motion on the Commons Order Paper – parliament’s daily agenda circulated to all MPs, ministers and senior civil servants – calling for the government to ban the practice.

They also want a legal limit put on the number of years an accountancy firm can audit the same company.

The two MPs said the Enron bankruptcy was just the latest in a long list of similar collapses involving off-balance sheet activities not properly controlled by the auditors.

They have long been complaining about the over-close relationship between some auditors and their client companies, especially where they supply other non-audit services.

The EDM reads: ‘We express out concern at the failure of auditors to control the off-balance sheet and other activities which led to the collapse of Enron and at the similar audit failures in such British companies as Queens Moat House Hotels, BCCI, Barings, Schroders, Equitable Life, Independent Insurance, Resort Hotels, Versailles, Transtec, British and Commonwealth, Wickes, Polly Peck, Maxwell and many others.

‘We urge the government to prohibit the sale of non-audit services to audit clients in view of the collusive dependence this generates between auditor and company and the incentive it provides to debase the audit by using it as a loss leader to sell other services to the audit client, and to limit the term of years an auditor can be appointed to a company.’

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