Lords report ties auditors in knots

THE RELEASE tomorrow of the House of Lords report on the audit industry has whipped firms into a frenzy of speculation with major players desperate to see how the thorny issues will play out.

Harsh criticism like that meted out by the Commons Treasury Committee and European commissioner Michel Barnier is unlikely, according to one Big Four partner.

Recommending mandatory audit rotation or joint audits would be a surprise too, with the board predicted to focus instead on the issue of ‘scepticism’ among auditors and non-audit services.

James Roberts, audit partner at BDO, said neither question is clear cut. He speculated whether the scepticism debate will centre on bank auditors or be more general, and suggested the non-audit services issue had taken a back seat.

Going concern and accounting for losses were favoured by Martyn Jones, senior audit partner at Deloitte, as contenders for the primary focus. These two issues kept springing up, he said, with auditor scepticism also receiving significant attention.

Steve Maslin, Grant Thornton’s audit policy chief, said Lord Lawson’s sharp interest in the quality of dialogue between auditors and regulators could make it a critical issue.

He said it was unlikely the House of Lords will mandate on rotation or joint audits, and suggested instead they would push for better disclosure from audit committees on the process of auditor selection.

Several senior accountants agreed that the Lords committee was unlikely to do more than highlight the role of the audit Committee, preferring instead to leave the knotty issue to Brussels.

Most Big Four partners are unwilling to speculate on what the closely-guarded document will contain before the public release on Wednesday morning during a press conference in Westminster.

Related reading