Audit retains central role in capital markets but support needed, UK Competition Commission finds
The United Kingdom Competition Commission’s investigation
and ongoing consultation on audit market concentration has put the spotlight on capital markets
corporate governance, according to the Institute of Chartered Accountants Australia (the Institute).
Late last week, the UK Competition Commission released preliminary findings from its investigation into the supply of audit services in the large listed company market. The Commission suggests there is limited engagement on the part of shareholders and that companies face significant hurdles comparing and assessing audit services.
Institute Head of Audit Policy Liz Stamford
says, ‘The Competition Commission’s recognition of the role of audit in overall capital markets governance is reassuring. It’s pleasing to see the findings recognise that most auditors act diligently and effectively and there is no deliberate manipulation among firms.
‘Many of the proposals for further review address the role of the director and shareholder community and highlight the need to look more at the corporate governance framework.
‘The Institute has engaged extensively with the director community in Australia advocating for a greater role for audit committees, who, as shareholder representatives, have a strong public interest, and we support any measures that strengthen the transparency of the oversight role of audit committees.
‘We welcome this robust review and hope that it engenders informed debate,’ Ms Stamford adds.
The options the UK Competition Commission will consider to encourage greater competition in the market and ensure the needs of shareholders are being met include mandatory tendering, mandatory rotation of audit firms and increasing the accountability of the external auditor to the audit committee.
In late 2011, the Office of Fair Trading
referred the UK audit market for investigation to the Competition Commission. The preliminary findings are part of a full report due early this week. The Competition Commission will be inviting feedback on this report and its possible options for review in preparation for the release of its final report late in 2013.
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Article last Updated 20 December 2013