PracticeConsultingFears of Big Five standards coup

Fears of Big Five standards coup

Concerns are growing that proposed changes to the global audit board could result in power residing exclusively in the hands of the Big Five.

IAPC, part of the International Federation of Accountants, issued a report in April for consultation on far-reaching changes to the composition and selection of its board members in an attempt to improve the organisation’s operation and transparency.

It is doing this ‘to develop auditing standards of unquestionable’ that will eventually be endorsed by Iosco, the club of global stock market regulators, paving the way for their use around the world. Iosco has recommended the IAPC amend certain operating systems in order to achieve its endorsement.

But unlike previous IFAC initiatives, the move to improve and develop global auditing rules is largely funded by the world?s biggest firms.

In feedback received to date, some accountancy bodies have already said they fear the balance will be skewed in favour of ‘major audit firms’.

Robert Cox, the Institute of Chartered Accountants of New Zealand manager of professional assurance, wrote:’The board is concerned as to whether the recommendations will provide appropriate balance to the IAPC membership. The board questions whether it is necessary to reserve five IAPC memberships exclusively for representatives of “major audit firms”.’

Equal concern was expressed by Ansarhusein Merchant of Chartered Accountants board in Dubai.

‘I strongly believe that “unquestionable audit quality” will be greatly facilitated if there is a truly international representation on IAPC. The composition of the membership needs a second look,’ he said.

IAPC has recommended its membership include five representatives from international audit firms and seven from IFAC member bodies with a majority of those from countries with strong national standard-setters.

Of the latter suggestion, New Zealand’s Cox wrote: ‘Whether or not the standard setting procedures are “particularly well-developed” is perhaps a matter of opinion and the board questions who will be judging the quality of the national standard setting procedures.’

Another concern is the breadth and depth of the debate. The IAPC’s report has been put out for consultation for just two months, ‘before the recommendations are fully adopted and implemented,’ as stated in the report.

But as Jonathan Beckerlegge, chairman of audit committee at ACCA, points out the IAPC initiative is largely funded by the Big Five firms and nobody else has come forward to ‘stump up the cash’.

‘To counter any concerns, there needs to be a greater dialogue and consultation with major users, small audit firms, governments and public sector bodies,’ said Beckerlegge.

‘If it becomes a focus group for the Big Five then it won’t be good.’

Links

Big firms in standards control bid

Fears rise over ‘firms regulating firms’

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