External auditors have warned that their exposure to negligence claims could rise if the recommendations of the long-awaited Turnbull committee report on corporate governance are adopted.
This week’s report, produced under the chairmanship of Rank Group director Nigel Turnbull, took many by surprise by failing to mention external audit, despite widening the remit of internal control from financial risk to general business issues. It will affect all UK-listed companies.
‘This may be a challenge to the audit profession and the Auditing Practices Board because it will broaden the scope of what they look at,’ Turnbull acknowledged.
APB technical director Jon Grant said the reference in the report to boards providing ‘reasonable assurance’ to stake-holders against material misstatement or loss could cause difficulties.
Deloitte & Touche national audit technical partner Martyn Jones agreed that external auditors would need to look carefully at risks associated with misstatements by directors. Grant Thornton technical partner Brian Shearer said clear guidance was needed.
Institute of Internal Auditors president Richard Gossage said the report would have been helpful to external auditors if it had been more specific in what they had to give an opinion on to limit their risk of being sued.
Analysis, page 4
Leader, page 12
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