The Financial Reporting Council set up the committee as part of its attempts
to open up choice in the UK audit market.
It is hoping to look at a ‘best practice’ code for audit firm governance. But
On the one hand, there seems to be little connection between the governance of
firms and the availability of auditors to big banks and other large companies.
What use will it be knowing that PricewaterhouseCoopers’ management board is
separate from its supervisory board, if you are aware that none of the other
firms can audit the multi-national bank you work for?
On top of that, better governance seems to be the last thing the firms need.
The point of good governance, after all, is to protect owners from managers.
But at a firm, the owners are the managers. Those who take on the risk in
audit firms work every day in those same firms: it’s not like a fund manager who
is hundreds of miles away and only sees regulatory statements.
What, then, can the Murray committee really do?
The major governance issue firms face must be the independence of auditors.
The constant criticism from outside the profession concerns perceptions of
non-audit work. Certainly, some of the criticism is pointless box-ticking, but
much of it isn’t.
Auditors like to say that the really big non-audit conflicts were resolved
when they stopped doing IT consulting.
Whether or not that’s the case, the firms can and should do more to reassure
the outside world that its independence is sacrosanct and its audits
Alex Hawkes is the news editor of Accountancy Age
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