The CGAA backed away from making a firm proposal itself and called instead for more rotation of senior members of audit teams.
And Hewitt also said the Department of Trade and Industry, Treasury and Office of Fair Trading are too look at the competition implications of the domination of the big four inÿ the accountancy market.
The Trade Secretary told the Commons: ‘We agree with the conclusion in the CGAA report that the principle of audit partner rotation should be extended to other senior members of the audit team and that the time scale for rotation of the audit partner should be cut from seven to five years.’
‘On the rotation of audit firms, the Treasury Committee, whose report was published yesterday, argues that there is a strong case for the mandatory rotation of audit firms as well as partners and teams. We and the Group will want to consider their report very carefully.’
‘Chancellor Gordon Brown and I are therefore asking the Group over the next few months to look more closely at audit firm rotation, including the implications for competition in audit services – and to report by around the end of the year.’
Hewitt also said: ‘The Group has recommended and we accept that the DTI and Treasury consider with the OFT whether there are any competition implications of the high concentration in the market for audit and accountancy services and whether any of the other proposals in the report have competition implications.’
She said she agreed with the report’s reccommendation for a further tightening of the rules governing the extent to which auditors can provide non-audit services to clients and has asked the Group and her Department to come up with proposals for such tightening and ‘on changes to regulations under the Companies Act to improve the disclosure by companies of the nagture and value of non-audit work provided by their auditors.’
Hewitt said she and Brown would consider making transparency of major accountancy firms’ own processes, practices and structures ‘compulsory for those audit firms undertaking the statutory for those audit firms undertakingÿ the statutory audit of major companies.’
They would consult on the issues with the recognised audit supervisory bodies by the end of the year.
She promised an early review of the way the accountancy industry was regulated and said that the new arrangements including the recently established Accountancy Foundation had ‘not progress as rapidly as we had hoped’.
In addition Hewitt promised more work for world-wide accountancy and audit standards between Britain’s Accounting Standards Board and its International Board equivalent and said the Financial Reporting Review Panel should ‘develop a pro-active role as well as simply responding to complaints’.
She also said: ‘The Group suggest that the government should consider the adequacy of the current enforcement arrangements more widely and we will do that as a matter of urgency.’