The UK Auditing Practices Board (APB) has
proposed amended ethics standards designed to increase transparency
around audit firms’ provision of non-audit services to audit
clients but has stopped short of introducing new restrictions.

The APB launched a consultation on the
provision of non-audit services by audit firms to their audit
clients in October 2009, following a Treasury Select Committee
proposal that auditors should be prohibited from providing these

There was an overwhelming view from the 150
respondents that there should not be an outright prohibition or any
major change to the conceptual approach taken by the regulator.

The current ethical standards and corporate
governance regime were seen as sufficient by these respondents.

Just three commentators (an investor, academic
and politician) argued that audit quality is compromised when the
auditor carries out any non-audit services.

A number of investor respondents argued there
should be greater disclosure about the nature and level of
non-audit services provided by auditors.

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Corporate respondents also said there was
scope for better disclosure of the type of work being undertaken by
an auditor and how companies ensure auditor independence is

The APB’s proposed changes to its ethics
standards have, therefore, mainly related to improving transparency
and the reporting of information about such services.

Most other proposed amendments aim to clarify
the existing rules.

Audit committee guidance

In line with the APB proposals, the UK
Financial Reporting Council proposed to enhance its guidance for
audit committees to encourage them to consider fees incurred for
non-audit services relative to the audit fee.

The FRC proposed audit committees should also
provide explanations of their policy on the provision of non-audit
services by the auditor and why it was thought appropriate that
specific services should be provided.

The deadline for both the APB and FRC
proposals is 23 October 2010.

The APB plans that any changes to its ethical
standards will apply to audits of financial statements for periods
commencing on or after 15 December 2010.

Of the 150 respondents to the APB
consultation, 109 were from the corporate sector, 24 from the
accountancy profession, nine were institutional investors and there
were eight others.


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