Standards of work and the conduct of company auditors and accountants are crucial to confidence in capital markets and the reputation of business the world over. That’s why I value this opportunity to speak through Accountancy Age about what the government is doing to make sure our system of corporate regulation remains robust.
The UK regime is built on solid foundations. This is shown by our stress on ‘substance over form’ and the ‘true and fair’ requirement for accounts, our approach to auditor independence and our independent oversight of the accountancy and audit professions.
All of these have set quality benchmarks for regimes in other parts of the world. But I’m clear that there can be no complacency. Where UK regulation should be improved, those who are best placed to do so – whether this is government, the independent regulator or the profession – have a duty to make this happen.
I’m not at all complacent about the risk of future corporate failures in the UK. The collapse of Enron and WorldCom in the US has been a lesson to us all. But I thought it crucial that we should look at the issues raised by these failures in a considered, thorough and open way, rather than rushing in with ‘stronger’ regulation that all of us might then have repented at leisure.
That’s why Gordon Brown and I put together a group to take a look at all aspects of our regulatory arrangements for statutory audit and financial reporting, with the input of independent regulators and the profession itself.
On Tuesday, following a recommendation by the group and my announcement to parliament in July, I published a consultation document on the way the accountancy and audit professions are regulated.
The Accountancy Foundation is, of course, a relatively new body but I want to look at whether we have got its role and structure right. Should there, for example, be stronger independent oversight of aspects of professional self-regulation in the interests of public confidence, or the monitoring by the professional bodies of the work and conduct of audit firms? Or is there indeed a need for independent regulation on some aspects? Would it make for more effective regulation if it were to focus on the company auditor rather than on the regulation of accountants in general? This is the direction taken by a number of other countries, and we need to look at whether there’s anything we should learn from them. And is the structure of the Accountancy Foundation the one that can help the organisation best deliver?
I want to hear from a wide range of interest groups, including business, academics, union and consumer groups, as well as from independent regulators and the profession itself.
I’m pleased with the constructive way in which the accountancy profession has responded to the challenges posed by Enron. I welcome, for example, the recent decision by the professional bodies to require rotation of audit partners every five years, instead of every seven. I look forward to your positive input to this consultation on the regulation of your profession.
- Patricia Hewitt, secretary of state for trade and industry.