The Auditing Practices Board (APB) updated its Ethical Standards for Auditors (ESs) in 2008. When revising the ESs, APB identified a small number of issues where further work and dialogue was needed. This has now been undertaken and, as a result, APB is consulting on further proposed amendments to its standards on topics that include:

• the rotation period for audit engagement partners on listed company audits
• remuneration and evaluation policies for key partners involved in the audits
• the provision of non-audit services relating to securitisation and restructuring services
• the provision of direct assistance to the audit team by internal auditors, and
• the definition of an audited entity’s ‘affiliates'

The APB’s work in relation to the rotation period for audit engagement partners on listed company audits has involved a number of discussions with interested parties and this has confirmed that the relevant arguments on the issue remain finely balanced. It will therefore be important that commentators from a diverse range of stakeholder groups respond to this consultation.

Richard Fleck, Chairman of APB commented:

“Although the APB is not proposing many changes to the Ethical Standards at this time we are addressing some important issues, especially in the context of the current economic conditions.

In setting the Ethical Standards APB strives to achieve the right balance between the need for auditor objectivity and the interests of different stakeholder groups. Consultation is a vital mechanism for us in this regard and I hope that investors and companies will send us their views as well as auditors.

Obtaining the views of all stakeholders is especially important in relation to determining what the rotation period for audit engagement partners on listed company audits should be. While it is clear that that there would not be universal support for changing the rotation period from five years to seven on all listed company audits, a number of audit committee chairs have expressed a view that extending the rotation period on the largest, most complex listed companies could help safeguard audit quality. We are therefore consulting on whether it would be appropriate to include greater flexibility on the partner rotation period in certain circumstances, provided that there is full disclosure of this to investors.”

A copy of the Consultation Paper may be downloaded free of charge from the Exposure Drafts page in the publications section of the APB’s web site: (www.frc.org.uk/apb).
 

1. The Financial Reporting Council (FRC), the UK’s independent regulator responsible for promoting confidence in corporate reporting and governance. Its functions are exercised principally by its operating bodies (the Accounting Standards Board, the Auditing Practices Board, the Board for Actuarial Standards, the Financial Reporting Review Panel, the Professional Oversight Board and the Accountancy and Actuarial Discipline Board) and by the FRC Board. The Committee on Corporate Governance assists the Board in its work on corporate governance.
2. The APB is committed to leading the development of auditing practice in the United Kingdom and the Republic of Ireland so as to:
   • establish high standards of auditing;
   • meet the developing needs of users of financial information; and
   • ensure public confidence in the auditing process.
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