The purpose of the Code should be clarified. Its primary role should lie in audit quality, but good governance should also be promoted across the firms as a whole.
The role of independent non-executives was important and could be strengthened in some areas. In particular investors wished to hear more from independent non-executives directly about their work and views on the firms’ performance on audit.
The firms should consider over time adopting provisions of the Corporate Governance Code not currently in the Audit Firm Governance Code.
The firms should maintain and grow the efforts they have built to engage with investors.
FRC’s CEO, Stephen Haddrill said:
“The Audit Firm Governance Code has led to an enhancement in governance of the major firms who have put significant effort into adopting its key provisions. Above all it creates, through the independent non-executives, an independent voice and challenge at the heart of the firms, which is of particular importance in view of their public interest responsibilities. The proposed new provisions will strengthen this voice further, provide clarity about the Code’s purpose particularly in relation to audit quality and encourage further transparency to investors.”
Notes to editors:
1.The FRC is responsible for promoting high quality corporate governance and reporting to foster investment. We set the UK Corporate Governance and Stewardship Codes as well as UK standards for accounting, auditing and actuarial work. We represent UK interests in international standard-setting. We also monitor and take action to promote the quality of corporate reporting and auditing. We operate independent disciplinary arrangements for accountants and actuaries; and oversee the regulatory activities of the accountancy and actuarial professional bodies.
2.The Audit Firm Governance Code was issued in 2010 and provides a formal benchmark of good governance practice against which firms which audit listed companies can report for the benefit of investors.