The Auditing Practices Board’s attempt to change rules for reviewing corporate governance provisions has failed to impress the Stock Exchange and other bodies.
The proposals appear to have fallen by the wayside following a meeting between the Stock Exchange and the APB last week. A Stock Exchange spokeswoman said it was still considering whether to make a formal response.
When the combined code on corporate governance was published last month, the APB issued a discussion document calling on the Stock Exchange to drop auditors’ responsibilities for reviewing corporate governance controls of their clients.
The APB said the Stock Exchange rules were redundant, since they required auditors to review just seven of the combined code’s 49 provisions. Auditors were already required to check the annual report and act on any inconsistencies, so the checks were unnecessary, said APB chairman Ian Plaistowe. Instead, the board proposed a new wording for auditor responsibility statements.
Institutional investors were reported to be particularly concerned at what they saw as an attempt by auditors to shirk their responsibilities. This view was echoed by auditor Danielle Stewart, of Warrener Stewart, who drafted the London Society of Chartered Accountants’ response to the APB paper.
Stewart supported the general idea of a new statement of responsibilities, but said the APB used too broad a brush. ‘I didn’t like the way it made it look like auditors were trying to duck their responsibilities,’ she said. The APB had given third parties just a month to comment, ‘as though the idea was to try and limit response’.
KPMG audit partner Gerry Acher, chairman of the English ICA audit faculty, said since the APB had not got what it wanted, there was a need to find a way forward that would be acceptable to all parties.
The institute this week confirmed it was setting up a committee to formulate guidance for company directors on how to draft reports under the code.
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