Institutes Think Reform Required for Audit: Lords Question Auditors
In an enquiry by the House of Lords, senior figures of UK’s accountancy institutes robustly defended the audit industry, but conceded that reforms are needed to maintain public confidence and protect standards of the profession as a whole.
Their comments have come at a time when there is a rising note of support for reforms from within the audit industry.
Earlier in this month, the EU had said that a cap of advisory fees and a mandatory rotation of auditors were being considered.
Mazars, which is a mid-tier accountancy firm, said that it wants dual audits.
John Griffith Jones, the chairman of KPMG in the UK, has called for a code of conduct that will aim at improving the communication between regulators and auditors.
Grant Thornton, which is UK’s 5th largest accountancy firm, has said in an interview that there should be a cap on the number of clients large accountancy firms can handle. This will reduce the dominance the Big 4 firms have on the large auditing market.
The members of the House of Lords in their latest session to discuss the financial crisis facing the audit industry yesterday, painted an unflattering picture of the industry as a whole. Peers claimed that some auditors comprised by their conflicts of interest, while some were asleep on the wheel when they were most needed while the audit profession was being completely dominated by the Big 4.
A former Chancellor during the Thatcher government, Lord Lawson, said in an interview that he knew of no cases when a firm “had managed to catch the ball” during the financial crisis.
Accountancy firms have been warned by the House of Lords that collapse of the largest firms was possible due to litigation from a large client.