FRC Believes it is Time to Review Value of the Audit

In light of the longer-term lessons of the financial crisis, Stephen Haddrill, chief executive officer (CEO) of the Financial Reporting Council (FRC), said that the council believes it is time to review the value of the audit and whether it can be enhanced.

Speaking at the Institute of Chartered Accountants of Scotland (ICAS) Aileen Beattie Memorial Event at Stationer’s Hall, he announced that the FRC would be publishing its thinking on this later in the year.

He said: “Audit is a key part of high quality governance. The auditor sees the company’s approach to risk. The auditor challenges management’s judgement on the financials. The auditor reports to shareholders on whether the company is providing a true and fair view of the business. The investor only sees the tip of the iceberg of work. But nevertheless investors are relying on that work being done.”

While not wanting to pre-empt the debate, Haddrill said that some of the key issues that need to be addressed are:

• How do we achieve a strong alignment between the auditor and the interests of the shareholder?
• Do we need to change the form of the audit report to make it more useful?
• Do we need to see more said in the front of the report about risk and the business model and should the auditor provide greater assurance about such matters?
• Can auditors give more help to regulators and avoid conflicts of interest in doing so?

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