ACCA has published guidance to help corporate audit committees provide greater transparency about their relationship with the external auditors they commission, in a bid to improve reporting in this area
The guidance, Enhancing the value of the audit committee, covers existing FRC requirements as laid out in the UK Corporate Governance Code and also summarises new proposals resulting from the UK Competition Commission work on the statutory audit market.
ACCA’s director of Special Projects, Roger Adams said: ‘Framing these reports will always be a challenge. There is a fine line between providing excessive detail and delivering a succinct summary of the most significant issues. Likewise, the issues surrounding the potential impairment of auditor independence via length of service or volume of non-audit services provided, gives continuing grounds for debate.’
The guidance examines how a small sample of FTSE 100 audit committees address the external audit aspects of their reporting responsibilities.
ACCA says the examples are not necessarily ‘best practice’ but should be seen as illustrative of the way in which audit committees are trying to fulfil their responsibilities under the Code.
The analysis shows that the companies studied are successful at providing investors with information about significant financial statement issues considered by the committee and also with more precise data illustrating the independent or arm’s length nature of the relationship between auditor and the company being audited.
The report also looked at additional disclosures that companies made which were not specifically required by the Code such as information on lead partner rotation and outsourcing of internal audit. There is a checklist provided to guide audit committee reporting in these areas.
Adams said: ‘The FRC has recently drawn attention to the need for audit committee chairs to pay attention to the qualitative aspects of their reports as well as to the more factual aspects. We hope that these studies will assist audit committee chairs in delivering reports which are more attuned to user requirements.’
ACCA plans to publish a follow-up paper later this year examining if and how audit committee reports issued in the first half of 2014 are tackling the new challenges posed by the proposals from the Competition Commission and the new guidance issued by the FRC.
