Auditing Practices Board chairman Ian Plaistowe this week urged the Stock Exchange to insist interim reports and preliminary results be subject to review by auditors.
‘I do not understand why, when price-sensitive information is put into the public arena, nobody wants an auditor to look at it,’ said Plaistowe, a partner with Arthur Andersen.
The APB chairman renewed his campaign to extend the audit remit in response to a proposal from the Securities and Exchange Commission that will require US companies to submit quarterly financial reports with interim reviews.
Many UK auditors are hostile to the idea, which they see as an issue for the Stock Exchange.
Around 50% of FTSE-listed companies do ask their auditors to review interims, but the rate tails off in smaller companies, according to the APB.
The SEC proposal featured in a ten-point plan (see below), published by a ‘blue ribbon’ panel that included PricewaterhouseCoopers CEO Jim Shiro and Ernst & Young counterpart Philip Lawasky. It echoed recommendations in recent UK corporate governance reforms.
‘The US tends to be more detailed than we like in the UK, but there are a number of things we should pick up in the UK,’ said Plaistowe.
TEN-POINT PLAN FOR AUDIT COMMITTEES
– New definition of independent director
– Require independent audit committee
– Minimum of three ‘financially literate’ members
– Written charter to detail responsibilities and duties
– Annual public disclosure of audit committee activities
– Clarify oversight responsibility for outside auditor
– Written report on relations with and independence of outside auditor
– Auditor to discuss quality of financial reporting
– Audit committee to report annually to shareholders
– Interim review of quarterly financial reporting.
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