EY US has set up an independent audit quality committee (IAQC), comprised of senior external leaders and a former member of the Public Company Accounting Oversight Board (PCAOB), which will advise the US firm’s senior leadership on issues that affect audit quality
The three inaugural members of the committee are Jeanette Franzel, who recently served at PCAOB and previously held several senior roles at the government accountability office (GAO); Bill McNabb, former chairman of Vanguard; and Charles Noski, who is currently on the board of directors of Booking Holdings and Microsoft and is chairman of the board of trustees of the Financial Accounting Foundation.
McNabb will serve as the chairman of the IAQC, which is charged with advising on the aspects of the firm’s business, operations, culture, talent strategy, governance and risk management that have an impact on audit quality.
Kelly Grier, EY US chairman and managing partner and Americas managing partner, said: ‘At EY, we believe in the power of diverse points of view in all aspects of our business. This includes harnessing the value of independent perspectives to further strengthen audit quality.
‘We believe that gaining insight and advice from the IAQC will help us fulfil our important role of delivering high-quality audits that build confidence in the US and global capital markets. Leaders of the SEC have also observed the benefits of independent and diverse thinking brought by outside leaders to support audit quality and the public interest.’
In the UK, the Financial Reporting Council‘s most recent annual report highlighted a decline in audit quality among the Big Four firms. In the US an academic report published by the American Accounting Association identified a so-called ‘alumni’ effect, suggesting in circumstances when a CFO or other top executive of a company being audited was formerly employed by the accounting firm conducting the audit, there is a risk from the ‘familiarity threat’ which can undermine audit independence and ‘breed cosiness’.
Report by Pat Sweet