Audit committees and their non-non executive directors will bear the brunt of the government's efforts to re-establish the integrity of auditors in the wake of scandals like Enron and WorldCom.
According to the report of the joint Department of Trade and Treasury working group, the committees, most often made up of non-executive directors, should be strengthened.
The report, obtained by Accountancy Age ahead of this afternoon’s announcement trade secretary Patricia Hewitt, says audit committees should have the principal responsibility for making recommendations on auditor appointment to the shareholders’.
And in a surprise move the report says the audit committee should also ‘approve the purchase of non audit’ services from the auditors.
The report, produced by the Co-ordinating Group on Audit and Accounting Issues, said: ‘We strongly support the view that an effective audit committee with clear responsibilities and reporting to shareholders, can play a key role on behalf of the shareholders in driving up audit quality and preserving auditor independence.’
Moves to beef up the role of non-executives and the audit committee will be met with disappointment in some quarters. Criticism has been levelled at those who advocate stronger audit committees that it side steps the crucial issue of how auditors function.
The trade secretary is expected to make an announcement this afternoon in the House of Commons outlining elements of the report.