2 April 2019
New proposals made by the House of Commons Business Committee to reform the external audit market will reduce the risk of future corporate collapses like Carillion, BHS and Patisserie Valerie. The Business Committee’s proposals in their ‘Future of audit’ report include separating audit work from other non-audit services and increasing the frequency that external audit contracts come up for renewal.
The Chartered IIA’s submission to the Future of audit inquiry contained recommendations to separate external audit work from non-audit services and make major companies put their external audit contract out to tender every 5-7 years rather than the current 10 year rule.
“The Business Committee is right to call for urgent and radical reform of the external audit market. In particular we welcome the call for the separation of audit work from other non-audit services such as consulting, to raise standards and eliminate potential conflicts of interest. We also welcome the proposal to reform the rules on auditor rotation and increase the frequency that external audit contracts at major companies come up for renewal.
“These changes are fundamental if we are to reduce the risk of future corporate collapses like Carillion, BHS and Patisserie Valerie.”