PracticeAuditToo much at stake.

Too much at stake.

Given the current furore over the role of auditors in averting corporate failure, the Financial Reporting Council's annual accounts published this morning should be a must-read for everyone with an interest in financial probity.

Covering the work of the Accounting Standards Board and the Financial Reporting Review Panel, the report makes three key points.

On the ASB’s work, it sounds two important notes: the importance of company law review and the European Union’s proposed 2005 deadline for listed companies throughout Europe to adhere to international accounting standards.

Few would question the need for the UK’s corporate legal framework to be dragged out of the Victorian era and few (outside of the US at least) question the advantages of a standards framework that would make a European capital market a realisable goal.

The report also notes the FRRP is asking itself key questions about its own role, more specifically about the ‘implications of its purely reactive approach’. Though somewhat reluctant to go down an SEC-style route, the panel has been asked to look again at adopting a more interventionist approach. This would present challenges in terms of improving procedures and perhaps even the sort of member recruits. But these are easily surmountable hurdles.

The events of recent weeks mean these changes cannot be dismissed as bureaucratic irrelevance. Indeed a modern system of company law, a set of accounting rules that allow company accounts to be tested against the same global benchmarks and a system that allows intervention before damage is done is nothing less than essential.

There is much more than the reputation of one company and one accounting firm on the line.

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