PracticeAuditAudit exits drag rows into the open

Audit exits drag rows into the open

New rules could see auditors clash publicly with their clients over the explanations for resigning from an audit, as both parties will be compelled to publish their reasons

New rules could see auditors clash publicly with their clients over the
explanations for resigning from an audit, because both parties will be compelled
to publish their reasons.

Lawyers have warned that the new rules, which come into effect on 1 April in
the Companies
Act
, will compel companies to report the circumstances of their auditor
stepping down to the audit authority and shareholders. Auditors will have to do
likewise.

There is an increased chance that more sensitive information around
accounting conflicts could now be exposed.

Kathryn Cearns, consultant accountant at City law firm Herbert Smith, said
that, for the first time, companies will no longer have the option of whether to
report, and must report if the auditor resigns before the audit term is up.

She said, however, that auditors could feel compelled to reveal difficulties
in the relationship with the client, in case the issue arises in public after
the auditor has left.

‘If the auditor has missed something or doesn’t reveal circumstances of their
resignation in their statement, they may feel exposed if the company should run
into problems later, relating to their audits,’ Cearns said.

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