The UK’s largest accountancy body has emerged all guns blazing against the US Securities and Exchange Commission with two reports claiming there is nothing wrong with the independence of auditors in the UK and that there is no evidence of non-compliance with its independence rules.
Written in response to the SEC crackdown on auditor independence, the English ICA’s stance will add weight to the opposition growing in the UK against SEC proposals for new rules which would ban auditors from running consultancy units.
Both KPMG and Deloitte & Touche have said legal action against the US body has not been ruled out and there is a growing belief that the logical conclusion of the SEC proposals is a ‘state run auditor service’.
The two reports were commissioned in February by the institute’s council and focused on a review of guidance and compliance on auditor independence.
Stephen Thomas, head of the Joint Monitoring Unit, which looked at compliance, said: ‘Our substantial review has provided the English ICA Council with the assurance that it sought in February. The independence concerns revealed by the SEC investigation in the US have not been repeated by English ICA registered firms.’
The conclusions will inevitably provide ammunition for those opposing the SEC proposals, who believe they would radically change the structure of the accountancy sector in the UK.
Mike Rake, senior UK partner at KPMG, said: ‘KPMG welcomes the publication of these two reports. They clearly indicate that auditor independence is highly effective in the UK. Further, the unnecessary interference of the SEC in seeking to create an artificial issue over auditor independence and provision of certain non audit services, by firms, is clearly not helpful at all.’
But many accountants are coming to the conclusion that it is auditors receiving fees that is the underlying issue for the SEC. Neil Lerner, practice protection partner at KPMG, said: ‘If you believe receiving a fee can compromise your objectivity, which they appear to do, that drives you to a state-owned audit profession.’
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