Parliamentary push for auditor rotation
Sweeping reforms that will overhaul the audit process and ensure the independence of auditors have been proposed following a parliamentary enquiry in the wake of US corporate scandals.
A report by the Treasury select committee published today has recommended the government draw up proposals to rotate auditors and audit firms to avoid ‘an undesirable cosiness between some firms and their auditors’.
‘There is a strong case for requiring – rotation of audit firms every five years’, the committee said. Also proposed is a ban on the provision of certain non-audit services to an audit client.
The proposals will anger the accountancy industry which has vehemently opposed all initiatives to rotate audit firms claiming the quality of audit will significant drop while the cost will rise for companies.
At least a one year cooling-off period should be brought in for auditors wishing to take up a job at a client they have previously audited, the report recommends.
The report was compiled after evidence was received from leading regulators and accountancy bodies, such as Sir Howard Davies, chairman of the Financial Services Authority, Lord Sharman, former international head of KPMG, and Sir John Bourn, chief of the National Audit Office.