Grant Thornton UK has proposed that auditors for FTSE 350 companies should be appointed by an independent body.

The firm’s head of assurance Jon Roberts told the International Accounting Bulletin that  the independent body should follow the ‘tried and tested’ approach used by the UK’s Public Sector Audit Appointments (PSAA)”.

Roberts said if a firm is independently selected as an auditor it can be “100% comfortable with the independence of that procurement and can act completely independently as it has that underwritten from the start in terms of the relationship with that body.

“But also the body has the advantage of being able to say 'well, we did not choose our own auditors either, we accepted the independent appointment' so the body actually gets credit for its commitment to independence.”

Roberts acknowledged that there would be complexities with establishing such a board, due to the FTSE 350 being a ‘broad church’ of different companies. He noted that this approach may not be a suitable model for all the FTSE 350 companies.

Grant Thornton’s proposal follows meetings which have been held in the UK by the Institute of Chartered Accountants in England and Wales (ICAEW), the Big Four and some of the other large firms, in attempt to resolve some of the issues surrounding the lack of competition.

An audit cap

Another suggestion to have come from the meetings has been to introduce an audit cap on the amount of FTSE 350 clients the Big Four are allowed to audit. While Roberts believes that Grant Thornton’s proposal is the best option, he said there is no reason that these proposals for reform should be mutually exclusive.

Roberts said that introducing an independent body to select the auditors of large companies could lead to a market that has a cap on clients within it, or a way of operating a joint audit selection process.

He noted that the independent body should consist of investors and other key stakeholders and should avoid the ‘alumni effect’, in reference to the criticism that other regulatory bodies have faced due to being too close to those who they are supposed to regulate.