This morning, the Auditing Practices Board (APB) published stakeholder feedback from its consultation on a possible prohibition of the provision of non-audit services by a company’s auditors.
Whilst the report revealed that stakeholders were strongly against such a wholesale prohibition, it did highlight the challenge the profession faces - that objectivity and independence of the auditor could be perceived to be adversely affected by the provision of non-audit services.
Our view is that this perception gap can be narrowed by greater transparency and better disclosure. Audit committees have a significant role to play here in ensuring that when agreeing additional work with the auditors, it can’t be seen to be compromising their objectivity and independence. The Financial Reporting Council’s consultation document, published in parallel, which sets out updated guidance on this will no doubt help.
However, the consultation document does go further, proposing extending prohibitions and restrictions on non-audit services in a number of specific areas. We need to consider these carefully. These proposals could have the greatest impact on AIM and small cap companies – although a few could extend to all audits. Accountancy practices of all sizes which provide these services could also be affected.
They could also potentially restrict the support available to businesses in distress, just at the point when they urgently need advice from professionals who are in place and know the business. Given the current state of the UK economy, businesses are dependent on access to the best professional advice. Now should not be the time to potentially change that.
I hope that all those who could be impacted by these proposals will study them carefully and ensure they respond to the APB's consultation. We certainly will.