Why compulsory audit rotation can’t be discounted

Positive responses to the idea, which is being put forward by Austin Mitchell MP in an early-day motion in the House of Commons, have been almost non-existent among top audit firms. Most predictably dismissed the idea with well-rehearsed arguments.

Cynics might suggest this could have something to do with the fact that it is Mr Mitchell who is making the proposal. His well-earned reputation as the scourge of the accountancy profession has made him few friends in audit circles.

But the attitude of top audit figures from the institutes and firms will not do them any favours when it comes to the way auditors are perceived by the public, particularly so soon after the publication of the Department of Trade and Industry’s report on the Maxwell affair.

And it’s not just the public. Last week’s Accountancy Age/Reed Accountancy Personnel Big Question found that 38% – a significant minority – of finance directors supported the idea of the enforced rotation of firms.

Admittedly, 54% were against the idea, but the minority in favour is large enough to merit more than a straight dismissal of the proposal.

Their comments were also interesting. The FDs told of lethargy, laziness and relationships that were too cosy. One even said: ‘As an auditor I have seen audit being bought off, and would like to see it nationalised.’

And given that these are the guys at the sharp end, they should know.

Audit firms and bodies probably think there is little risk in ignoring Mitchell, and indeed the wider public. But the views of finance directors, their major point of client contact, are surely more difficult to ignore.

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