PracticeAuditMPs grill Hewitt over audit report

MPs grill Hewitt over audit report

Scottish chartered accountant turned Liberal Democrat MP Michael Moore has called for government sponsored regulation of the accounting industry, in response to yesterday's DTI report on audit.

The report said fledgling watchdog, the Accountancy Foundation, would undergo an earlier than expected government review, which would, among other things, look at how the Foundation is funded, although the government back tracked on plans to implement mandatory auditor rotation.

Click here to read about a review of the Accountancy Foundation

Today, Moore questioned Trade and Industry secretary Patricia Hewitt, asking: ‘Do you accept that the current regulation situation is a mish-mash – not even the accountancy bodies and professionals understand how it operates – and that until we have government-sponsored regulation, the confidence of those who use accounts will not be regained?’

She replied: ‘I agree with you that the current situation is pretty complicated. That is one reason why we are taking a fresh look at the whole structure of the professional oversight of accountancy, the regulatory framework and the oversight of that regulatory framework.

‘I am not particularly attracted by the idea of the government becoming, presumably, the sole supplier of audit regulation but we will look at that as part of the review of the regulatory framework that I have announced.’

She said she was not prepared to rush into ‘knee-jerk reactions’ to accounting problems in the US that did not apply to the UK.

Also at the questions and answers session, Edinburgh North and Leith MP Mark Lazarowicz called for strong rules to govern auditors offering their clients lucrative non-audit services.

He asking Hewitt: ‘Do you accept that there will always be a problem with public confidence and a risk of conflict of interest when an accountancy firm receives large fees from a company to act as an auditor while receiving fees for non-audit services whose very continuation depends on the audit wing of the firm giving the company a clean bill of health?’

But Hewitt backed the review’s cautious approach to the subject saying it was ‘sensible’ adding: ‘It will look at a much more careful definition of the kind of non-audit services that would not be acceptable for auditors to provide. A more careful analysis of the different kinds of non-audit services that may be provided by audit firms will provide the basis for much better and more transparent decision making in the sector.’

Father of the Commons and Linlithgow Labour MP Tam Dalyell said divorcing non-audit services from auditing could hit small accountancy companies hard by increasing their audit costs, but Hewitt said she was not sure this problem applied to small audit firms which ‘tend to concentrate on purely audit and accountancy services’.

On a separate point, Hewitt rejected claims by Tory MPs and CIPFA members David Taylor (North-West Leicestershire) and Andrew Tyrie (Chichester) that the use of Public Private Partnerships and the Private Finance Initiative were a means of keeping public sector debt off the balance sheet.

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