The proportion spent on non-audit work from company auditors has fallen significantly, while the number of wholly independent audit committees in the FTSE All Share index has increased from 40% to 51%, according to a report from PIRC, one of the UK’s leading advisers to big investors.
Corporates have heeded the combined code and, on average, reduced the volume of non-audit work given to auditors from a ratio of 2:1 to 1.5:1.
But the PIRC research indicates there are signs of intransigence. Only 34% of companies have complied with the code to ensure that half their board members are nonexecutive directors.
That said, companies seem determined to ensure that non-audit work does not go to their auditor. In a recent interview with Accountancy Age Nick Land, chairman of Ernst & Young, revealed that 53% of the firm’s fees now come from other firms’ audit clients.
‘Perceptions of audit independence have significantly reduced the non-audit services that companies buy from their audit firm,’ said Land.
Senior figures in the City believe compliance with the code can aid a company’s bottom line. Gavin Grant of Deutsche Bank said: ‘UK companies that move towards, or are in full compliance with governance best practice standards gain a performance boost, according to our research.’
PIRC managing director Alan MacDougall said: ‘Compliance with the new combined code will be a major challenge for companies, but if they get it right evidence suggests they will reap rewards in terms of their performance.’
The combined code was revised in the wake of Enron and WorldCom. Separate reports by Derek Higgs and Robert Smith looked closely at the role of non-executive directors and audit committees before making several recommendations.
The new code suggested that audit committees should be made up entirely of non-executives, and that at least one of them should have ‘recent and relevant financial experience’.
The second largest improvement in ‘significant’ levels of financial distress since the EU Referendum was in professional services, found research from Begbies Traynor
Two new audit partners have been appointed at the firm BDO in its audit practice following continued growth and investment
Investment in people, tech and businesses impacts on EY's profit per partner figure
If businesses do not take cyber security seriously in their business planning regulators may do it for them, the ICAEW has warned