Leaks undermine FRC’s audit reform

The body hammering out ideas on audit choice was thrust into the public glare
this week after its deliberations were leaked.

The
Market Participants Group (MPG) met on Tuesday this week to continue
discussions, but a report in the Financial Times about an MPG idea to force the
Big Four to spin off their audit arms threatened to undermine the group’s work.

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Steve Maslin, Grant Thornton’s head of external professional affairs, said:
‘If it was a leak [MPG member Michael Cleary] would be hugely disappointed.
Michael wanted that group to feel free to discuss issues without feeling they
were going to appear in the press. Then you can have creative thinking.

‘If everybody thinks things are going to appear in print you aren’t going to
get creative ideas.’

The FT reported a Financial Reporting
Council (FRC) analysis of the impact of a Big Four audit spin-off, which was
presented to the MPG as a possible solution to audit choice issues.

The report concluded that while spin-offs would extend choice, the impact on
quality was unknown and would involve a small although not intolerable cost.

But the idea was then dropped.

Sources close to the MPG said they could not understand the motives for
leaking privileged documents. They were also shocked that one of the 12 elected
members in the group had begun talking publicly about confidential discussions
despite a strict agreement not to do so until they had agreed the content and
format of what would be published.

‘The papers containing the information were only circulated to FRC staff and
group members. Whoever has done it was probably foolish to put out an idea that
was shot down anyway,’ the source said.

FRC chief executive Paul Boyle was not available for comment. MPG members
approached also refused to comment on the issue.