The Auditing Practices Board - part of the Financial Reporting Council - has today published a consultation paper concerning audit firms' provision of non-audit services to the listed companies they audit. The consultation paper is being published following a recommendation made by the Treasury Select Committee. The Committee stated in its report Banking Crisis: Reforming Corporate Governance and Pay in the City (May 2009) (see para. 237 in chapter 6):We strongly believe that investor confidence, and trust in audit would be enhanced by a prohibition on audit firms conducting non-audit work for the same company, and recommend that the Financial Reporting Council consult on this proposal at the earliest opportunity".
The APB's consultation paper provides: an overview of the non-audit services provided by auditors and the reasons why this can undermine auditor independence; a description of the approach taken by the APB with regard to auditor independence since 2004 and subsequent developments; and a summary of the approach taken in Europe, France and the USA.
Against this background, the APB seeks responses to several general questions including whether the provision of non-audit services to audit clients impacts confidence in the independence of auditors and, if so, which non-audit services are of concern. Views are also sought on the APB's current approach and whether change is needed through, for example, increased disclosure or the pre-approval by the board or audit committee of non-audit service engagements.
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