Governing bodies tighten ethical standards for auditors
The APB and FRC have issued revisions to the rules governing ethical standards for auditors.
The Auditing Practices Board (APB) and Financial Reporting Council (FRC) have both published revisions to their ethical standards for auditors’ codes of practice following parallel consultations in July 2010.
“The APB believes that it is important to address these concerns because the perception, as well as the reality, of auditor independence is critical to investor confidence in the quality of audit,” said the organisation in a statement.
The body has introduced more stringent measures for auditors assessing threats to their independence. It also said it will introduce a new non-audit services disclosure regime and increase the role of audit committees in overseeing the retention of a company’s auditors to undertake non-audit services.
“The changes introduced, taken as a whole, represent a significant tightening of the requirements in relation to the provision of non-audit services by auditors and introduce a new approach designed to address investors’ perception concerns through greater transparency,” said Richard Fleck, chairman of APB.
“We believe these changes should better equip shareholders to hold Audit Committees and auditors to account for, and therefore to influence, the choices they make in this important area.”
Meanwhile, the FRC has published a new paper, ‘Audit Policy: Lessons from the Crisis’ to the European Commission, containing proposals which it says will reduce the systemic risk associated with the level of audit market concentration.
“The FRC’s overall objective is to preserve and enhance audit quality which, in turn, helps investors to make sound judgements and supports efficient capital markets,” said Stephen Haddrill, chief executive of the Financial Reporting Council.
“I hope that a clear strategy will emerge around which agreement can be forged that will both enhance audit quality and promote more competition in the marketplace.”
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