The government has recently consulted on audit regulation issues.
This is important but, given the speed with which businesses and securities markets are globalising, so too are the international dimensions. Many of the audit issues currently being debated in the UK also apply when considering an international approach.
One issue is who sets audit standards. International standards are currently established by the International Auditing Practices Committee, which comprises practitioners from 14 countries. An important part of the Auditing Practices Board’s constitution is that half of its voting members are non-auditors. This has helped reassure UK users that audit standards are in the public interest. The same approach may be desirable internationally.
Another factor recognised in the consultation paper is that standards are only one part of the framework. Regulation needs to be addressed on a holistic basis. There are important links between auditing and ethical standards and how both are implemented in practice. An important question is how they can be monitored to ensure consistency.
Developing an international approach will, of course, add to the demands on the accountancy profession. I am very pleased the International Federation of Accountants is being provided with additional funds to oversee standard setting, ethics, and other technical areas. This is a useful start but there is much to be done.
An important structural issue is whether the international bodies should replace existing national activities or co-ordinate with them. I believe the UK has much to contribute and would favour the latter approach, at least for the foreseeable future. If so, the challenge will be how best to co-ordinate an international approach that reduces the differences in national systems, minimises duplication among regulators and, most importantly, avoids confusion in relation to the audit of international groups.
Jon Grant is technical director of the Auditing Practices Board.
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