Sweeping changes were brought to the regulation of accountants last week by trade secretary Patricia Hewitt who also sent a clear message that she was happy with the efforts of firms and institutes to ensure the integrity of the industry.
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Hewitt announced the end of the Accountancy Foundation and said its responsibilities will be taken on by a much-expanded Financial Reporting Council which becomes a super watchdog for accountants.
It was also accepted that the firms had done enough in separating from their consultancy arms to stave off any further regulation on what services can be offered by auditors.
The trade secretary also decided that the ICAEW’s decision to impose a five-year rotation on audit lead partners instead of seven was enough to satisfy the need for objectivity and roundly rejected proposals for mandatory audit firm rotation of compulsory retendering.
And in a move predicted by Accountancy Age, she said the Financial Reporting Review Panel – the body that investigates company accounting – would go proactive and receive risk-assessment expertise from the Financial Services Authority. But the FRRP will remain as part of the Financial Reporting Council.
The Auditing Practices Board will also get a fresh set of responsibilities by taking over the setting of standards for ‘independence, objectivity and integrity’.
Hewitt said: ‘The overall package is tough when that is needed but measured and proportionate. It will ensure that our corporate governance structures remain among the best in the world for the benefit of millions of pensioners, savers and business that depend on them.’
Proposals put forward by the group, chaired by DTI minister Melanie Johnson, on non-executives and audit committees were also accepted by Hewitt. These included that audit committees be made up of just non-executive directors with at least one of them possessing relevant financial experience and qualifications. Recommendations to strengthen the definition of independence for non-executives were also accepted as was the proposal that at least half the members on a company board be NEDs.