Turnbull backs off

The forthcoming Turnbull committee report on internal controls is expected to stop short of requiring internal auditors to provide an opinion on the adequacy and effect of corporate controls.

Businesses have warned that the report, which is due out at the end of this month, could kill off corporate governance if it is too prescriptive.

The inquiry – led by Rank Group finance director Nigel Turnbull – is the biggest review of internal controls since the Hampel Committee proposed the consolidation of Cadbury, Greenbury and its own recommendations into one Combined Code last year.

The inquiry’s remit was to provide guidance for directors on the scope, extent, nature and review of internal controls. Once published, the report will be open for consultation and is expected to become part of the Stock Exchange’s Combined Code by the end of the summer.

Lex Service head of group operational audit Sarah Blackburn said: ‘I am hoping that Turnbull does not produce a long list of controls which would not help me manage risk and could destroy the value of internal audit.’

NatWest Group head of audit Richard Gossage said he believed that most heads of internal audit in the FTSE-100 would agree since an over-prescriptive approach would make compliance a burden and cause companies to lose sight of the benefits of control.

He added that a lack of guidance would be equally damaging as it would leave individual internal audit functions in confusion.

‘I rather expect them to take a middle-of-the-road view and I am confident that they will say the approach adopted by an internal audit function should be risk-based rather than a compliance-based,’ he said.

Gossage said he would like to see the committee’s report include a recommendation that internal auditors provide an opinion as to the adequacy and effect of controls, though he expected it not to do so.

A source close to the committee told Accountancy Age it would not produce a prescriptive document, saying it wanted to help rather than hinder business.