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ICAEW asks for patience in audit reform

Michael Izza, chief executive of the Institute of Chartered Accountants in England and Wales, has warned the public to be ‘realistic’ about the timescales of any audit reform in the UK.

In a letter to the Financial Times, Izza said he agreed that a shake-up of the audit market for large listed companies is urgently required.

He also confirmed the idea a potential market cap could be a ‘viable way to bring about real, sustainable and beneficial change’.

But Izza also warned about the need to consider the interests and behaviours of audit committees and executives, to avoid them objecting to not being allowed to choose a Big Four firm.

He said even if the Big Four agree to give access to their technology and clients get on board with the cap, this would not resolve the issue of scale. He added: “For these firms, getting to a position where they can take on large multinational audits will take time: this is not an issue of quality — there is plenty of that — but of capacity.”

Getting up to scale will take time, and Izza warned: “Impatience, and the imposition of simplistic or hasty measures, risk not only adverse unintended consequences but could significantly damage global perceptions of the UK as a place to do business.”

Last week the ICAEW met with the Competition & Markets Authority to discuss potential ways of reforming the market. This meeting came on the back of meetings between the ICAEW and the largest firms in the UK, including the Big Four, where measures such as the potential client cap were discussed.

Commenting on the mood of the industry, Izza concluded with a remark that there is a broad consensus across the accountancy profession that change is necessary, as well as what might be practicable and effective.

He finished: “It will not serve the public interest if, in the interests of securing a sprint finish, we fall at the final hurdle.”

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