PwC’s initiative to improve transparency of the audit process is welcomed but consideration needs to be given to the personal liability of audit committee chairs, according to KPMG Audit Committee Institute head Tim Copnell.
“As a non-executive audit committee chairman you have to start thinking am I taking on extra liability by signing this report?” Copnell said.
He told the International Accounting Bulletin that a way to overcome the issue would be to make it a board statement.
“I guess it would be one for the courts to decide if something went wrong. I don’t think chairs would object to the disclosure of the information, maybe just attaching their own personal name to it.”
PwC UK audit partners are currently asking audit committee chairs of its FTSE 100 clients to include more narrative on the audit process, including conversations auditors have about significant risks of misstatement.
According to Association of British Insurers assistant director of capital markets Michael McKersie investors will also be positive towards more informative governance reports, although he raises the question on whether it should be up to auditors or audit committees to disclose this.
“If [PwC] are getting a good reception from directors, this might be quite productive,” McKersie added.