FORMER CHANCELLOR of the exchequer Lord Lawson has warmly welcomed “the direction of travel” in European commissioner Michel Barnier’s leaked audit reform paper.
The Tory peer was a leading voice in the House of Lords inquiry Auditors: Market concentration and their role, and Barnier’s recent emissary mirrors many major issues identified by the body.
“I’m absolutely pleased with the way it seems to be going,” said Lawson (pictured), observing: “It would seem as though Barnier has read our report and agrees with it.”
Lawson was broadly supportive of the most radical proposal banning the provision of audit and non-audit services by the largest firms, potentially forcing them to split or cease audit altogether.
“I can certainly see the case for a complete split and it is something the Competition Commission should take very seriously” said Lawson, referring to a probable investigation by the commission into the UK audit market.
“I am well disposed towards the proposal, but I am not able to say for sure before seeing the Competition Commission’s findings,” he mused.
The House of Lords called upon the Office of Fair Trading to examine the issue with a view to calling in the more powerful Competition Commission. The OFT is currently considering a referral and most stakeholders expect the commission to conduct a full investigation.
Lawson was less positive on joint audit, calling it “a continental practice”. “I’m not sure whether it’s necessarily a brilliant idea. And even if it is, it’s not nearly as important as the division of audit and non-audit services,” he said.
Expert observers have underlined strong similarities between the House of Lords report and the European Commission draft paper, even down to the phraseology.
Barnier called auditors “the dogs that didn’t bark”, a Lawson line used when questioning why the alarm was not raised in the run-up to the financial crisis.
Going concern is another House of Lords preoccupation reprised in the EC paper, which questions why auditors gave banks a clean bill of health shortly before governments bailed them out.
One expert observer called Lawson “inherently Euro-sceptic”, saying his support for Barnier’s proposals is a “very powerful” weapon in the commissioner’s armoury.
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