PracticeAuditHostilities resume with investors

Hostilities resume with investors

Once again investors and accountants are to face each other in a stand off over auditor responsibilities.

This time the venue will be the House of Lords and the battleground, the
company law reform bill – in particular, a series of amendments to clause 486 on
auditor duties.

The measures, according to Labour’s Lord McKenzie, ‘would limit the duties of
auditors so that they would have to report on problems to the extent that they
prevented the accounts being properly prepared’.

Innocuous, you might think – but the institutional investors clearly do not.
They have reacted with horror, claiming this is a ‘stealth move’ to dramatically
reduce the care of duty of auditors. Along with the granting of proportionate
liability and removing the jail terms for ‘knowingly or recklessly’ giving an
incorrect opinion, the investors believe things have gone a little too far.

Clearly some care has to be taken here. Investors, must not be allowed to
offload all the risk onto the shoulders of auditors. Conversely, auditors cannot
escape responsibility. Most of all, audit quality cannot be undermined.

But a look at the wording brings another issue to mind. Investors in the UK
are adamant that the approach to accounting and especially auditing remain
‘principles based’, especially given their ongoing concerns over what they see
as rules-based international auditing standards. Yet they could be falling into
the trap of pushing for more clearly defined rules.

The trick the government has to pull off is ensuring that the auditors are
not tied up in red tape, while still providing the assurance that their
principal clients, the shareholders, demand. This one could run and run.

Related Articles

PwC found negligent by US judge over Colonial Bank's $2bn fraud

Audit PwC found negligent by US judge over Colonial Bank's $2bn fraud

2w Alia Shoaib, Reporter
Deloitte South Africa investigated over Steinhoff audits

Audit Deloitte South Africa investigated over Steinhoff audits

4w Alia Shoaib, Reporter
Top 5 audit fines of 2017

Audit Top 5 audit fines of 2017

1m Alia Shoaib, Reporter
PwC replaces EY as Domino's auditor

Audit PwC replaces EY as Domino's auditor

1m Alia Shoaib, Reporter
The ‘uncomfortable truth’ behind FRC’s Big Four fines recommendations

Audit The ‘uncomfortable truth’ behind FRC’s Big Four fines recommendations

1m Carl Johnson, Stephensons
BDO holds off Big Four to retain top position as AIM auditor

Audit BDO holds off Big Four to retain top position as AIM auditor

1m Alia Shoaib, Reporter
FRC urged to fine Big Four firms penalties over £10m

Audit FRC urged to fine Big Four firms penalties over £10m

2m Alia Shoaib, Reporter
EY to audit Standard Chartered bank

Audit EY to audit Standard Chartered bank

2m Alia Shoaib, Reporter