The consultation paper asks 20 questions on a range of topics from risk management and governance structures to issues of scope, implementation and monitoring.
The governance code is one of the key recommendations in last year’s Financial Reporting Council (FRC) Market Participants Group report.
The aim of the project is to improve choice in the audit market and mitigate the risk of a major firm collapsing and exiting.
“This project can help to promote confidence in, and choice among, accountancy firms that play a major public interest role in those markets,” FRC chairman Christopher Hogg said. “It deserves to be taken seriously.”
One requirement of the code being mooted is that firms introduce independent non-executives on a governance board and that independent non-executives form part of board committees covering audit, remuneration and nomination matters. Some firms already reflect this requirement in their current governance structures.
In October, the US Treasury Advisory Committee on the Auditing Profession also recommended the inclusion of independent board members.
A particular problem highlighted in the consultation is the impact of auditor independence and liability issues on non-executives. UK auditor independence and liability requirements are different to those in the US and this could impact upon British firms with Security and Exchange Commission-registered clients.
Firms, investors, listed companies and other stakeholders are invited to submit their views by 31 January 2009.
Robert Hodgkinson, AFG project director and executive director of technical issues at the Institute of Chartered Accountants in England and Wales, added: “During the first half of 2009 we will prepare a draft code for further consultation. This evidence-gathering phase will be crucial in producing the draft code, which is why it is important that those who have views submit them.”