UK audit watchdog's proposal to allow partners to oversee large companies audits for seven years rather than five could undermine accountant's independence warns leading shareholder advisory body, Pirc
A proposal by the UK’s audit watchdog to allow partners to oversee large
company audits for seven years rather than five under current rules could
undermine accountants’ independence, a leading shareholder advisory body has
warned.
The criticism from Pirc
is a setback to the
Auditing Practices
Board after the
Association of British
Insurers last week backed the suggestion to relax rules for audit partner
rotation.
The APB has proposed to extend the time an audit engagement partner can stay
at a large listed company before moving to another client, if given permission
by the company’s audit committee.
David Ellis, head of Pirc’s UK corporate governance team, said the APB
proposals – part of a consultation to update ethical standards for auditors –
would be a backward step.
‘The idea of rotating a partner is that a fresh view can be bought to the
audit and that the auditor does not get too close to the company,’ he said.
‘Extending the time an audit partners stays at a company leaves more questions
about the audit not less.’
Ellis also called for companies to continue to rotate their audit firm every
five years.
But KPMG said it supported the APB’s rotation proposal. ‘There may be
advantages to clients who see the expertise and continuity of the audit
[engagement] partner as being an important service,’ said Neil Sherlock, partner
in public affairs at the Big Four firm.