Representatives from the UK audit
profession have welcomed the idea of an investigation into whether
the role of the auditor could be extended to provide greater
assurance to shareholders.

A new report from the UK House of Commons
Treasury Committee, Banking Crisis: Reforming corporate
governance and pay in the City
, has examined the role auditors
played in the UK banking crisis and how their performance could be
strengthened.

The committee concluded that auditors
fulfilled their duties as currently stipulated, but also discussed
whether these duties could be extended.

The committee accepted UK Financial Reporting
Council (FRC) chief executive Paul Boyle’s advice that auditors are
not well placed to provide additional assurance on the risk
management practices of financial institutions, but some members of
the profession have argued there is potential for the profession to
offer greater assurance.

PricewaterhouseCoopers UK head of assurance
Richard Sexton said it is important to first re-examine the entire
reporting model.

“Auditors come along behind the reporting
model to provide assurance to various stakeholders that statements
made by management are reliable. So, step one needs to be to take a
look at the model, work out the information that is most helpful
and then decide which piece is most helpful to get external
assurance on,” Sexton said.

“We have got huge skill in providing
assurance, we can apply it in a whole number of different areas,
but that should come after you have defined the model.”

Ernst & Young UK and Ireland assurance
leader John Flaherty said the report “challenges us to rethink the
way in which we deliver audit services to ensure that they meet
companies’ and shareholders’ needs in a modern business
environment”.

Institute of Chartered Accountants in England
and Wales chief executive Michael Izza argued that while risk
management may not be something auditors have the skills to opine
on today, it is an area chartered accountants understand well.