• Register
Return to: Home > News > Standards > FRC responds to CC preliminary findings on audit

FRC responds to CC preliminary findings on audit

The Financial Reporting Council (FRC) has welcomed the Competition Commission's (CC) preliminary findings on the statutory audit services market.

Stephen Haddrill, chief executive of the FRC, noted the importance of investigating the audit market and how it serves investors, while making three key suggestions on the CC's findings.

The primary issue for the FRC is the CC's preference for mandatory audit rotation as opposed to mandatory retendering. The FRC prefers retendering, believing full rotation to have a potential "adverse effect on audit quality, artificially constraining businesses' choice of audit firm."

It would also prefer any tendering to be on a 'comply or explain' basis, as this "allows for flexibility" and "recognises the role of the investor in key governance decisions."

However, the FRC supported the CC's aim to reinforce the external auditor's accountability to the audit committee, recognising that the UK Corporate Governance Code has given the audit committee's reporting responsibilities to investors.

However, it says that newly introduced extended reporting requirements have increased the remit of both auditors and audit committees, and that these changes need time to take effect, with the impact being monitored.

On the topic of audit quality review, the FRC says that as a strong inspection regime is "an important component of giving confidence to investors", it agrees with the CC that more frequent AQR inspections "should be considered" in some cases of higher risk.

Haddrill said early signs hinted that the FRC's autumn revision of the UK Corporate Governance Code, which included provisions on 10 year retendering and increased reporting responsibilities of audit committees to investors "are already making a difference."

He added: "We are keen to discuss with the Commission the case for further steps once there has been sufficient time for these changes to take full effect."

Related Article

FRC

Related Link

Haddrill defends comply and explain principle

 

Top Content

    Time pressure: Facing up to mental health

    In an ‘always on’ culture, it is becoming increasingly difficult to manage a healthy work-life balance. While companies are beginning to address this problem by introducing different support systems, Joe Pickard finds more could be done to ensure the wellbeing of the professions workforce.

    read more

    Venezuela: the race for the dollar

    With a new currency following hyperinflation, large sections of the population emigrating to neighbouring countries, an economy on the brink of collapse and no apparent solution coming from the government, Jonathan Minter finds a profession struggling to stay afloat in Venezuela.

    read more

    Brazil: transparency and control

    Brazilian accountants have an optimistic view of the impact of more-regular reporting and the implications of audit controversies for the profession. Paul Golden reports.

    read more

    Argentina: looking for a clearer view

    The Argentine accounting profession continues to grapple with the impacts of a weak economy and a culture of financial corruption. Paul Golden takes a closer look.

    read more

    Blockchain: adapting to disruptive tech

    In the relatively few years since digital currencies first began using blockchain technology, the array of potential applications has grown significantly – and continues to expand. Dan Balla, Matthew Schell and Dave Uhryniak from Crowe look at how it impacts accountancy.

    read more
Privacy Policy

We have updated our privacy policy. In the latest update it explains what cookies are and how we use them on our site. To learn more about cookies and their benefits, please view our privacy policy. Please be aware that parts of this site will not function correctly if you disable cookies. By continuing to use this site, you consent to our use of cookies in accordance with our privacy policy unless you have disabled them.