UK: FRC to examine the value of the external audit

In a lecture delivered earlier this week - available here (pdf) - the chief executive of the Financial Reporting Council, Stephen Haddrill, announced that the FRC would later this year begin a consultation on the value of the external audit. As part of this work, Mr Haddrill identified the following issues (to quote directly from the transcript of his speech):

• How do we achieve a strong alignment between the auditor and the interests of the shareholder? Shareholders are remote from audit. Management are in the room. Do we need to do more to reinforce the auditors’ sense of responsibility to investors?
• Do we need to change the form of the audit report to make it more useful? Can the auditor say more about how much risk is being carried and about the nature of valuations: are they central estimates or at the edge of riskiness?
• 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? They have in the past and they should again.