Corporate Governance - APB proposes new formula
The Auditing Practices Board this week proposed a new definition of auditors’ responsibility that would limit their requirement to review corporate governance arrangements set out in the Combined Code, writes John Stokdyk.
In its consultation document, ‘Auditors’ Responsibility Statements and Auditors’ Reports on Corporate Governance’, published yesterday, the APB recommended dropping the Combined Code’s requirement for auditors to review seven governance provisions.
The code, which amalgamates the findings of the Hampel, Cadbury and Greenbury committees, is due to come into force for year-ends after 30 December.
Instead, the document sets out a new ‘comprehensive’ statement, explaining that auditors review all the information in the annual report – including directors’ statements on corporate governance.
Jon Grant, the APB’s technical director, pointed out the new Stock Exchange Listing Rules require auditors to review only 7 out of 49 provisions in the Combined Code compared to 11 out of 19 in the current Cadbury code.
‘Looking at the detail of a portion of the code doesn’t add much assurance to users,’ said Grant. ‘We’re not trying to run away from existing responsibilities, but trying to stand back from what is currently done.’