In response to the Department for Business, Energy and Industrial Skills’ initial consultation on recommendations by the Competition and Markets Authority, Maggie McGhee, ACCA’s executive director – governance, said:
‘In assessing the remedies proposed by the Competition and Markets Authority (CMA), ACCA reiterates our long-held belief that any proposals must focus primarily on increasing audit quality. It is fundamental to investor and public confidence and the longevity of audit reform.
‘ACCA is not supportive of the joint audit proposal in the CMA’s interim study, and our position remains unchanged. The final proposal which requires FTSE 350 companies, with limited exceptions, to be jointly audited by at least two audit firms, with at least one being a non-Big Four firm, does not address the concerns that we raised in our initial response.
‘There is an insufficient evidence base to demonstrate that the proposal will not be detrimental to audit quality - the evidence from academic research is mixed at best.
‘ACCA recommends using the joint audit proposal for a five-year review of progress to trial, rather than mandate, recommendations in order to give an informed and balanced understanding of their viability.
‘Our proposed interventions include a two-year “cooling-off” period following the end of an audit relationship during which the former audit firm is prohibited from selling services to the entity and considering a prohibition on management from firing their auditors during their terms of service.
‘Ministers, including BEIS’ new secretary of state Andrea Leadsom, should consider carefully the evidence base available in support of each suggestion, the related cost/benefit analysis, and the practicalities of implementation.’
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