No need for non-audit ban, regulator claims
Regulator suggests more disclosure around non audit services
Accountants will not have to give up their non-audit work for audit clients,
under proposed guidelines released today, which have not recommended an outright
ban, suggested by politicians in the wake of the financial crisis.
The Auditing Practices Board, of the Financial Reporting Council, which
publishes guidance for auditors, does not believe an outright ban on non-audit
services should be enacted and has instead proposed to tinker with present
disclosure requirements.
Changes would include additional guidance on what is and isn’t audit
services, along with new in-depth guidelines on what audit committees should
consider when considering hiring a firm.
The APB’s review of non-audit services grew out of the Treasury Select
Committee’s report into the banking crisis.
At the time the committee said it “strongly believed that investor confidence
and trust in audit would be enhanced by a prohibition on audit firms conducting
non-audit work for the same company”.
The new guidance falls short of the recommendation. The APB said the vast
majority of respondents did not favour a prohibition on auditors.
The news will likely be welcomed by auditors which often benefit attract
lucrative fees from non-audit work. While in listed companies the ratio of audit
to non-audit work has been in steady decline since the Enron scandal of 2002, in
non-listed companies it continues to be a thriving business.
During Deloitte’s audit of failed car maker MG Rover, the ratio of audit to
non audit fees was revealed to be 15:1. Investigators found no evidence that the
level of audit fees compromised Deloitte’s objectivity and independence.
Further reading:
Row
over non-audit services rages as FRC prepares review