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December 6, 2010

ICAS proposes new corporate assurance model

The Institute of Chartered Accountants of Scotland (ICAS) has issued a report calling for the duties of company auditors, directors and non-executives to ensure greater transparency and accountability to shareholders.

The Future of Assurance outlines a new model of corporate assurance, including the external audit and assurance process and develops the responsibilities of the audit committee and company directors.

The new model recommends boards to outline rationale and key assumptions in concluding that a business is viable for at least 12 months and for auditors to provide an explicit opinion on going concern judgements of directors.

Other key recommendations include:

  • Assurance to be provided on the front half of the annual report by means other than a traditional audit opinion, utilising auditor knowledge of the business to provide comfort over the narrative reporting of management;
  • An expanded audit committee report disclosing key areas of discussion between the committee and external auditors;
  • Audit committees to disclose policy to ensuring an effective audit process. In addition to the annual review of the audit appointment, the audit committee should perform a more in-depth review every five years to include engagement with the shareholders; and
  • The audit committee chair and audit partner should appear at the annual general meeting and be prepared to answer written questions submitted on the disclosures in the audit committee report, with questions on the audit process and opinion directed to the audit partner.

The report was produced by a working group chaired by ICAS past-president Douglas Nisbet and comprised of investors, preparers, auditors and representatives from both media and academia.

 

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