The requirement for a company’s auditors to be “independent” dates back to the companies legislation of the 19th century which first regulated the affairs of companies in the UK. Lack of independence has continued to present problems – it was a key part of the problems leading to the collapse in 2001 of both Enron and its auditors (then one of the largest accountancy firms in the world), and has underlain many of the corporate scandals which have arisen since then.
But there has been little development in the law itself in this area: rather, it has been left to shareholders to determine who should be appointed to act as their company’s auditors (and to fix their remuneration), and UK legislation has required audit supervisory bodies (RSBs), including the Institute of Chartered Accountants in England and Wales, to adopt the Ethical Standard for Auditors issued by the Financial Reporting Council (FRC) in order to meet independence requirements.
Publication of the European Union Audit Regulation and revised Audit Directive in April 2014 changed the landscape. The new regime has applied since June 2016 and imposes additional independence requirements, over and above those in the previous APB Ethical standards and ICAEW Code. The Financial Conduct Authority has amended the audit committee requirements in the Disclosure Guidance and Transparency Rules, and the FRC has published updated versions of the UK Corporate Governance Code, its Guidance on Audit Committees, Auditing and Quality Control Standards and a consolidated Ethical Standard.
This webinar looks at the important topic of auditor independence, will unpick the new rules, and consider some of the issues surrounding the topic, including:
- The extent to which auditors may carry out consultancy, tax advisory work and other non-audit services for their audit clients
- Auditor firm and audit partner rotation
- Audit contract retendering and auditor changes
The webinar will also look at the reports required to be given by auditors on the accounts they have audited, and the responsibilities and liabilities accepted by auditors in carrying out this work (first formally examined by the Cadbury Committee). The nature and content of the auditor’s report will be considered against current statutory requirements and developing practice in this area, now the subject of review by the FRC.
The webinar will be relevant and of interest to all lawyers with corporate clients, company secretaries, auditors and other finance and governance professionals whose work concerns financial statements and their audit.