PracticeAuditFSA denies rule changes will raise audit costs

FSA denies rule changes will raise audit costs

A significant rise in audit fees should be avoided despite increased responsibilities brought about by changes to the listing rules, the Financial Services Authority has urged.

Link: FSA wants auditors to inspect internal controls

The FSA has released proposals for consultation that would see the auditors of listed companies required to review the 10 combined code provisions relating to audit and accountability.

These include the board’s review of the company’s internal control systems and the role and responsibilities of the audit committee. In addition, it will also require auditors to consider whether the ‘comply or explain’ statement required by the code has been made after ‘due and careful enquiry’.

New guidance form ICAEW on compiling accounts

An FSA spokesman defended the proposals, saying they were less onerous than those in section 404 of the Sarbanes-Oxley Act, which force auditors to make a judgement on the effectiveness of a company’s internal controls.

‘We have produced a cost-benefit analysis and the rules will not impose incremental costs on issuers of more than minimal significance,’ he added.

But companies should expect considerable rises in audit fees in the future, according to PricewaterhouseCoopers partner Peter Wyman.

‘Although this will not push audit fees up dramatically, the forthcoming OFR will be extra work,’ he said.

‘A review of Turnbull is likely to bring us close to Sarbanes-Oxley 404, again meaning more work for auditors. A combination of all these things will mean a significant upward movement in fees, but people are expecting greater assurance and the UK can’t afford to be left behind.’

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