The ICAEW delivered an outstanding and informative event titled “Spotlight on Audit Committees: A Step Change in Transparency”.  The event presented at the Department of Business, Innovation and Skills attracted senior members of the audit community investment fund managers and business decision makers.

Charles Bowman, Audit Quality Forum Chair and Chairman of the ICAEW Audit and Assurance Faculty, opened the evening by reminding the audience that the audit industry remained under the spotlight for decades and with the recent study reports published by the Competition Commission the markets had refocused their attention yet again on the industry.

Jo Swinson, Minister for Employment Relations, Consumer and Postal Affairs delivered a keynote emphasising the importance of audit quality, independence and concentration of the audit market in the FTSE 100.

Jo Swinson MP said:

“Audit quality underpins trust and confidence which leads to investment and growth. Investors should be able to trust the information published by companies”

“Independence is crucial to maintain trust in the industry however, the perception of auditor independence is equally important”

The Honourable also said that companies needn’t restrict themselves to the top four but explore the possibilities of other firms.

ICAEW had already signed-up to the initiative to promote woman to represent 25% of its boards by 2015 and would encourage all FTSE 100 companies to do the same to improve diversity and skill contribution at board level.

Melanie McLaren, Director Codes and Standards FRC, took on Audit Committees and said their reports were largely boilerplate which needed improving and highlighted the difficulty the industry faced in facilitating engagement between shareholders and the auditors.

Melanie said:

“to do this FRC will provide a platform to look at the usefulness of audit committee and auditor reports from an investor viewpoint and audit quality purposes”

Ian Richards, Head of Governance and Responsible Investment, came in with a contrasting speech criticising  the financial reporting standards and their effectiveness.

Ian said:

“We have concerns around the reporting quality under IFRS and that audit committee reports are very poor and not useful as one would expect”.

“Investors look for usefulness and a proportionate report; not a three hundred page document that mainly has been a “cut-and-paste” from previous years with change in numbers”

Ian suggested what will be useful to include in the subject reports:

• Key decision taken by boards

• Internal Controls and accounting system improvements that remedy previous issues

• Key decisions taken that have material impact on operation and financials and

• Discussions that have taken place with auditors and how they have satisfied the necessary requirements as auditors.

Steve Barber, Audit Committee Chair, Next Plc. took the stage opening his speech by criticising the Competition Commissions’ attitude and report.

The Next Plc., Audit Committee Chair said:

“The Competition Commission report suggests Audit Committees are not doing their job. This has no truthfulness and does not reflect the facts.”

Steve continued his speech by stating and agreeing to an extent with Ian Richards comments that “Less is more”. And issued a warning to Audit Committees that they should “stick to the fundamentals, so the purpose of the Audit Committee Report is not lost”

Andrew Ratcliff, PWC Partner, also joined the evening, demonstrating his industry experience and insight into auditing.

Andrew confessed that auditing, accounts and corporate reporting are complex exercises, nevertheless, required to be coherent and was surprised by the fact, why the Competition Commission Report underplayed the importance of non-executive directors’ role on boards.

Andrew suggested,

“More time is needed to improve Audit Committee Reporting and the Competition Commission report is not conclusive”

Andrew agreed that, “auditor reports should indeed include how auditors have dealt with risks rather than just numerating materiality”

The insightful evening came to a close with a Q&A with the audience.