Sir Win Bischoff, Chair, Financial Reporting Council gave the keynote address at the Governance Institute of Australia’s National Conference earlier this month. In his introduction he noted that he would be stepping down in October after some five and a half years.
Addressing the audit market, he said: “The new UK Corporate Governance Code is shorter and sharper than its predecessors, a practical objective I set our management. It places emphasis on Boards taking account of the interests of all key stakeholders. In doing so it emphasises the importance of long-term value creation and a culture that supports that longer-term vision. The Code requires Boards to decide what type of behaviours and culture they wish to promote in order to deliver their business strategy. Since behaviours and values must run through the whole organisation, that requires advocacy and monitoring.”
Looking to the future of audit regulation in the UK, Sir Win noted that: “A number of stakeholders suggested to the Kingman Review that there is a case for introducing in the UK something similar to, the Sarbanes-Oxley (SOX) regime in the US specifically relating to internal controls. I might call it SOX-light. This would provide assurance around internal controls. The pros and cons of such a regime should at least be considered, and then consulted upon, paying special attention to proportionality. Transparency is another theme in Sir John’s review. He recommended more transparency in our annual audit quality and corporate reporting review findings of the largest audit firms in the UK; and a timely and transparent complaints resolution.”
Sir Win went on to compare UK and Australian experiences, saying that the conclusions reached by Commissioner Kenneth Hayne’s Royal Commission review in Australia were broadly in line with those in the UK. Sir Win said: “Commissioner Hayne declared that the responsibility for corporate conduct (and misconduct) lies with the board, and that this must have consequences for the board’s role, priorities and accountability. He expressed a clear expectation that the board will challenge management and ensure accountability… As a side comment, while auditors are blamed in many quarters for the failure of companies, the prime responsibility must lie with a company’s board of directors and its management. Yes, auditors need to be more sceptical and consistent, but theirs is likely to be a contributory rather than prime factor in any corporate failure. Let me hasten to add that this does not excuse auditors’ shortcomings!”