Auditors reject calls for rotation
Leading accountants have hit back at demands for the compulsary rotation of audit firms made in the wake of the DTI Maxwell report.
Gerry Acher, a senior partner at KPMG, slammed the idea, saying the case for audit firm rotation was not proven.
The attack came as Austin Mitchell MP, regarded by some as the scourge of the audit profession, prepared to table an ‘early day motion’ in the House of Commons, calling for companies to be made to change auditor after seven years.
Many companies in the FTSE-100 have retained the same audit firm for many years – when KPMG lost the audit for NatWest after the bank had merged with Royal Bank of Scotland, it brought to an end an audit relationship that had lasted for over 100 years.
Acher said: ‘I don’t think the benefits of rotating audit firms are proven and certainly would not lead to a more objective audit. There would be a massive amount of disruption, adding nothing.’The motion, also sponsored by Newcastle MP Jim Cousins says: ‘We believe that it is now time to ensure proper industry regulation of auditing to make it a system of independent and effective evaluation of companies.’
Martyn Jones, Deloitte & Touche’s national audit technical partner, argued a change in audit firm would not get to the root of the problem and that it would be better to call for tougher penalties against those that deliberately deceive the auditor.
He said: ‘You can change the deckchairs on the ship, but if the captain is out of control you will still hit the iceberg.’
Roger Housechild, head of the audit and assurance faculty of the ICAEW said: ‘A change of audit firm could actually suit some companies who would be dealing with a new team that lacked knowledge of the business.’
Links
MP introduces Bill for audit rotation
Maxwell report calls for audit rotation
£10m Maxwell report slams auditors