Stephen Haddrill, Chief Executive of the Financial Reporting Council, spoke at the ICAS Aileen Beattie Memorial Event at Stationer’s Hall yesterday. In light of the longer term lessons of the financial crisis, he said that the FRC believes it is time to review the value of the audit and whether it can be enhanced. He announced that the FRC would be publishing its thinking on this later in the year.

He argued that:

“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.”

Whilst not wanting to pre-empt the debate, he 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?

1. The Financial Reporting Council (FRC) is 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. All Press enquiries should be addressed to Jon Hooper telephone: 020 7492 2344 or at j.hooper@frc.org.uk.