UK professional accountancy bodies have
defended the audit profession although warned reform could be
necessary to protect standards and help restore public confidence,
a British government investigation has heard.

The House of Lords economic affairs committee
asked leaders of the four largest UK accountancy institutes their
views on Big Four market concentration, the ability of auditors to
provide non-audit services for audit clients, the adoption of joint
audits, and whether the profession had become a compliance driven
‘box-ticking’ process.

 

Restrictive lending and joint
audits

Institute leaders said they do not believe
market concentration is threatening the financial services sector
and the Big Four, due to their size, is best placed to audit the
largest listed UK companies and banks.

Association of Certified Chartered Accountants
chief executive Helen Brand said removing restrictive lending
clauses that force companies to choose a Big Four firm would help
improve choice in the marketplace.

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By GlobalData

Institute leaders are strongly opposed to
mandatory joint audits, saying it is a costly and inefficient way
of conducting audits.

Institute of Chartered Accountants in Scotland
senior vice-president Ian McLaren said joint audits can become a
bureaucratic nightmare and firms can easily start playing against
each other.

Narrative reporting and corporate
governance

Committee member Lord Lawson said all services
should be offered in the market, with the stipulation that no
client should be receiving all their services from one audit
firm.

Institute of Chartered Accountants in England
and Wales executive director Robert

Hodgkinson agreed, adding that it was
important to enforce audit objectivity. He proposed an open debate
on the issue, fearing that imposing regulatory restrictions would
only hide the issue behind a ‘box-ticking’ process.

Chartered Institute of Management Accountants
chief executive Charles Tilley said that assurance over narrative
reporting – the front end of the accounts – could offer potential
opportunities for smaller firms.

McLaren suggested the issues of auditor’s
liability and corporate governance would need to be examined more
closely, especially if the scope of the audit is expanded.

The committee will hear evidence from the
mid-tier and Big Four in the coming weeks.