PracticeConsultingAnnual audit review urged

Annual audit review urged

Listed companies should review audit processes annually, according to a guide published by the Scots ICA

‘Appraising Your Auditors’ examines the audit relationship from the client point of view and was produced in response to repeated requests from members in business for guidance on auditor selection, said David Wood, assistant director of accounting and auditing at the institute.

The guide includes a checklist of issues to help the audit committee review the audit process and discusses the role it should play in ensuring audit quality and independence. Copies have been sent to all listed companies.

Deloitte & Touche senior partner and chief executive John Roques, who served on the institute’s working party, dismissed the suggestion that annual audit reviews would encourage companies to change auditors more often.

‘Many listed companies do carry out annual reviews, both formal and informal,’ said Roques. ‘If they communicate areas where the auditor’s contribution could be enhanced, they would improve relationships and performance.’

PricewaterhouseCoopers audit technical partner Tony Bingham added that while the paper was explicit in recommending an annual review, it was merely formalising the Hampel recommendations on corporate governance.

‘On-going dialogue between the external committee and auditors is a good thing and need not mean a higher rate of churn,’ he said. ‘Changing auditors is not necessarily in the interests of the shareholders.’

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