In January 2010 the FRC and Institute of Chartered Accountants in England and Wales (ICAEW) published the Audit Firm Governance Code.
The Code is the result of a recommendation in the October 2007 report of the FRC’s Market Participants Group that “every firm that audits public interest entities should comply with the provisions of a Combined Code-style best practice corporate governance guide or give a considered explanation”. An independent Working Group was set up under the chairmanship of Norman Murray, supported by the ICAEW, to produce the Code.
The Working Group recommended that the code should be applicable to those firms that audit more than 20 listed companies and that it should apply to financial years beginning on or after 1 June 2010.
The Code applies to eight audit firms that together audit about 95% of the companies listed on the Main Market of the London Stock Exchange. For these firms, the code sets a benchmark for good governance which other audit firms may wish to voluntarily adopt in full or in part. It also codifies much existing good practice and links to matters that audit firms must comply with as regulated professional partnerships.
The Audit Firm Governance Code
The seven firms to which the code applies are:
Baker Tilly LLP
Ernst & Young LLP
Grant Thornton LLP
The FRC monitors the extent to which these firms comply with the Code. We also engage directly with the Independent Non-Executives which the firms have appointed under one of the Code’s key provisions.