The Financial Reporting Council (FRC) plans to
limit the scope of its suggested ten-year audit retendering to FTSE
350 companies only.

In a consultation on a possible revision of
the UK Corporate Governance Code and International Standards on
Auditing (UK and Ireland) the watchdog has watered down its initial
proposal to include all listed companies in the ten-year
retendering to the FTSE 350 only.

The FRC said it made the amendment because of
expectations the market would struggle to cope with overwhelming
requests leading to the greater resources of the Big Four being
favoured.

The consultation also requests the FTSE 350
follow the ‘comply and explain’ rule.

The Institute of Chartered Accountants of
England and Wales has not fully welcomed the FRC proposal and its
executive director Robert Hodgkinson said while tendering could
enhance transparency the decision on the choice of auditor should
remain with the audit committee based on their assessment of a
company’s needs.

“These should place emphasis on factors such
as quality, innovation and communication, as well as price. The
audit committee still has to be accountable to shareholders for its
choice,” Hodgkinson explained.

Other proposed changes relate to the
Stewardship code and include a clarification of what is meant by
stewardship and a request to investors to disclose their policy on
stock lending.

According to the outcome of the consultation,
possible changes will apply to financial years beginning on or
after 1 October.