Specifically, the institute has recommended audit partners should be subject to a two-year cooling off period before they join an audit client as an employee or director. Also proposed is the tightening of rules governing the rotation of audit partners and the framework surrounding the provision of non-audit services to an audit client.
Peter Wyman, who became president of the ICAEW last week, said: ‘I know these proposals are not universally welcomed. But I believe the advantage of being able to say we fully comply with international and European best practice outweighs the inconvenience these changes will cause.’
Industry observers are questioning whether these changes are of real benefit to the audit process or simply cosmetic tweaking. Certain partners at the Big Four firms have admitted these changes will benefit public perception but will not improve the quality of audit.
Admittedly, that is just half the battle. Most accountants recognise the Enron collapse has raised two issues; that of public perception and that of the real issues about audit quality and independence.
The ICAEW reforms will go part way to restoring confidence. Now comes the deliberation about what changes can be implemented to improve financial reporting and that of independence.
Arguably much of what needs to be done to improve financial reporting and corporate governance lies in the hands of government and regulators. Many of the improvements already exist in recommendation-form by the company law steering group.
Frustration is tangible in the ranks of accountants who are keen to see the government reform an already antiquated law.
Wyman said: ‘A lot of what needs to happen next is in corporate governance. It’s not something the profession can do. I hope it [the company law review update] is included in the Queenås speech and enshrined in legislation.’
Clearly defining the role and responsibilities of directors, reform to audit liability, structuring a statutory operating and finance review and improvements to audit committees are some of the changes accountants want to see.
Steve Maslin, partner at Grant Thornton, agreed: ‘The profession can’t act alone to mandate improvements to audit committees, directors’ responsibilities and corporate governance issues.’
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