The major reforms proposed in a review published by Sir Donald Brydon have been welcomed by the ICAEW, however it has warned against implementing reforms “in haste”.
In the review, published earlier this week, Brydon states that “audit is not broken but it has lost its way and all the actors in the audit process bear some measure of responsibility,” and proposed a series of reforms to help the sector.
These include a redefinition of audit and its purpose in order to better reflect the public interest, that auditors should not just be regular accountants and instead should be a separate body that is approved and licensed and improved auditor transparency, with new requirements to publish their profitability from audit work and the remuneration of statutory auditors.
“I hope that this report can, together with other action being taken by government and regulators, help auditors earn back shareholder and wider public confidence,” Bryden added.
Commenting on Sir Donald Brydon’s review of audit, Michael Izza, ICAEW chief executive, welcomed the report and said: “Sir Donald’s thorough report contains some bold proposals which could change the way the accountancy profession operates within the UK business landscape.
“We agree that audit urgently needs to keep pace with the needs, not just of investors, but of wider stakeholders in society, and we are long-standing advocates of proportionate and practical change to restore public trust.”
He added: “We are pleased Sir Donald recognises the role played by all the directors of a company, and the need for the whole board to be accountable. We will consider the recommendations in detail and continue to work with all parties to deliver a coherent programme of reform.”
However, speaking to the Telegraph, he warned that the landscape has become “very complicated” and that reform “would concern us if it’s implemented in haste.”
The news comes after The FRC issued a “major” revision to its Ethical Standard and revised Auditing Standards, earlier this week, in order to support the delivery of “high-quality” audit in the UK.
The regulator said the changes will help to “strengthen” auditor independence, prevent conflicts of interest and ensure the UK is seen as a destination to do business, because of “stronger investor protection resulting from high quality audit”.