Recommendations for the mandatory rotation of auditors among FTSE 350 companies are unlikely to increase the quality of audit, according to ICAS (the Institute of Chartered Accountants of Scotland).
Responding to provisional recommendations by the UK
Competition Commission that audit firms should be changed every 7, 10 or 14 years,
ICAS Director of Technical Policy James Barbour questioned whether the move would
be of benefit to audit quality.
“The quality of audit is the fundamental concern behind any
recommendations which seek to increase the level of choice in the FTSE 350 market,”
said Barbour. “ICAS is concerned that some of the CC proposals could have
significant cost implications for firms and the regulator.”
Barbour also raised doubts about whether the proposals would
increase choice in the market.
“We are concerned that today’s proposals may not achieve their
central aim,” he said. “It remains to be seen how exactly they would expand the
pool of audit firms being engaged.”
Barbour also took issue with the Competition Commission’s view
that “too often auditors’ focus is on meeting the needs of senior management
who are key decision takers on whether to retain their services”.
“The suggestion that auditors are more concerned with
retaining clients rather than working in the public interest and in the
interest of investors does a disservice to the rigorous work and high level of
professionalism of audit professionals,” he said.
Barbour welcomed the Competition Commission’s move to ban contractual
clauses requiring that an audit must be undertaken by a Big Four firm.
“This is one a number of positive aspects to the CC proposals,”
Barbour said. “The decision not to further restrict the supply of non-audit
services by auditors to their audit clients is also to be welcomed.”
Barbour noted that today’s are interim proposals, and said that
ICAS looked forward to continuing its engagement with the Competition
Commission and other bodies on continuing efforts to improve the audit market.
Notes to Editorsview
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