Audit chiefs favour ban on consulting work
Internal audit chiefs want either a ban on external auditors providing consulting work or more rigorous controls on the provision of consulting work.
Of 62 internal audit chiefs interviewed, 42 said reform of corporate governance structures would reduce the likelihood of another Enron-style collapse occurring again, a survey by the Institute of Internal Auditors found.
The audit chiefs also called for the appointment of ‘stronger’ non-executive directors from a wider range of backgrounds.
The survey found the collapse of Enron had made UK board directors uneasy. Those polled said just under two thirds of their boards had expressed concern about auditor independence.
Gail Easterbrook, IIA chief executive, said: ‘It is clear that a majority of heads of internal audit want change following the Enron debacle. They feel that two of the major governance relationships – that between the external auditors and the audited company and between the non-executives and the board – are not working as effectively as they should. That needs to change.’
The SEC, under the leadership of Arthur Levitt, campaigned hard for new laws favouring auditor independence, prior to him stepping down in February 2001.
Ernst & Young, rapidly-splintering Andersen and KPMG (US) have all spun off their consulting arms, while PwC filed for an IPO last week.