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October 31, 2011

EC proposals have merit say FTSE100 audit committee chairs

FTSE100 audit committee chairs have questioned the reasons behind the European Commissions (EC) audit reform proposals, but agree some have merit, according to a research by the Institute of Chartered Accountants in England and Wales (ICAEW) and Brunswick Research.

The research of 25 FTSE100 audit committee chairs found that there is no support in presumption that audits helped accelerate or lead to the financial crisis.

An audit committee chair quoted anonymously thinks the Green Paper is trying to “correct a wrong that doesn’t exist”.

“I think that’s the bottom line here. We – certainly in the UK – have a broadly sound system which occasionally doesn’t perform quite as well as it should,” they said.

Audit Committee chairs have however expressed concern over the level of competition in the market and highlighted the continuing focus and reassurance on auditor independence and greater use of third party and peer review of audit practices as some of the areas needing improvement. ICAEW chief executive Michael Izza said when considering their proposals, the EC cannot ignore the voice of business.

“As this research shows there is scepticism over the rationale for these proposals but recognition that change is needed in a number of areas to ensure UK audit quality remains world leading,” Izza said.

The Audit committee chairs also called for more transparency around audit but warned it should be balanced with the requirement to protect commercial sensitivities.

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