• Register
Return to: Home > News > Financial Results > FRC to consider banning auditors from providing consultancy services

FRC to consider banning auditors from providing consultancy services

The UK’s Financial Reporting Council (FRC) is to consider whether auditors should be banned from providing consulting work for bodies they audit as part of a wider review to prevent auditor independence from being compromised.

The FRC has said it will work closely with UK’s Competition and Market Authority (CMA) in this area.

A review, which will cover audit independence as well as audit quality and the future needs of investors and corporate viability, has been announced by the watchdog in an attempt to ‘ensure audit better serves the public interest’.

As part of the review, the FRC is to develop proposals to strengthen requirements on auditors when considering whether an organisation is a going concern. This will include ‘whether the responsibilities of auditors in assessing companies’ statements on their longer term viability should be enhanced and whether auditors should report publicly on their views of the realism of assessments made by companies’.

The watchdog acknowledged that recent company failures were part of the reason for the investigation.

FRC CEO Stephen Haddrill said: “This comprehensive reform programme addresses the fundamental issues underlying falling trust in business and the effectiveness of audit, whilst also looking to ensure that the requirements on what companies say about themselves are fit for the future needs of stakeholders. If stakeholders are to have confidence in audit, they also need to have confidence in audit rules and regulation.

“The FRC has reviewed how we can improve audit quality and our supervision of audit firms. In addition to the programme set out today we look forward to proposals from Sir John Kingman and the CMA.”

Haddrill made reference to John Kingman who is currently leading an investigation to determine whether the FRC is fit for purpose. The investigation was launched upon request of UK members of parliament following the inquest into the collapse of Carillion.

The CMA is also in the process of determining whether a formal investigation into the lack of competition in the UK’s listed audit market is necessary.

The UK audit market has received a large amount of political scrutiny over the last year due to a range of high profile company failures. Along with formal investigations in to the state of the profession, the Big Four and five of the other leading firms have held meetings with the Institute of Chartered Accountants in England and Wales over the summer to develop proposals in an effort to curb the dominance of the Big Four in the listed audit market.

Top Content

    South Africa: sensing new opportunities

    It has been an interesting couple of years for the profession in South Africa. A number of high-profile scandals have brought the profession and the role of auditors into sharp public focus, brewing a distrust towards accountants and a large expectations gap. Joe Pickard reports.

    read more

    Ghana: a quest for consistency

    Ghana’s current economic profile would suggest a fertile landscape for purveyors of accounting services. But inconsistent approaches to compliance and application of standards – coupled with problems in the banking sector and consequent liquidity constraints – have created a challenging environment. Paul Golden writes.

    read more

    Drone technology: audit takes to the skies

    The movement towards a digitised era has already impacted the auditing profession in a number of ways, from blockchain to artificial intelligence. Now firms are taking to sky and using drone technology in their audits. Mishelle Thurai speaks to Big Four firms to find out more.

    read more

    SBC: a new alliance joins the market

    Jonathan Minter speaks to Paul Tutin, chair of founding firm Streets Chartered Accountants, about why the business and its European partners took the decision to launch their own association.

    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.