Audit ethics could hit bankers and lawyers

Bankers and lawyers who provide information relating to audits face having to follow similar ethical guidelines to auditors if the government listens to the Audit Quality Forum.

Link: Question mark over AQF’s future

The think-tank will create a working group to examine the duty of care owed by third parties that provide information on an audit client, and could recommend that they should be subject to the same ethical guidelines governing the work of auditors.

‘At the moment, bankers, lawyers, tax advisers, surveyors and the like are not covered by the same ethical guidelines that auditors are,’ said Gerald Russell, chairman of the AQF. ‘Nor are there any legal constraints like there are on directors misleading auditors. That sort of thing doesn’t appear to apply to third parties, even though they are important constituents of the chain.’

The forum, which comprises representatives from the profession, investors, business, regulators and government has also established a working party to look at the fundamental purpose of an audit. Russell said it would look at what an audit currently achieves and what it does not, what auditors should and should not be doing and what level of reliance can be placed on an audit.

This group will also look at international standards on auditing – a controversial topic prompting growing disquiet among investors – and what form the audit report should take.

But the forum has yet to appoint a replacement chairman for the competition and choice working group, following the resignation of Tim Bush from Hermes last week. Bush stepped down, claiming the work of the group was compromised by conflicts of interest. Russell said his replacement would probably be someone with a neutral stance.

Peter Wyman, head of professional affairs at PricewaterhouseCoopers and an AQF member, played down talk of a split in the forum’s ranks. ‘The forum is talking quite sensibly about concerns that different groups have,’ he said. ‘If you understand the concerns, then you stand a chance of being able to do something about them. Everybody wants quality financial reports with a high level of confidence.’

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