The Auditing Practices Board (APB) of the Financial Reporting Council (FRC) is calling for more professional scepticism in the conduct of company audits. This reflects repeated representations made to the FRC by UKSA, most strongly in a written submission 12 months ago criticising the way in which the regulator had previously described the auditor's role. Its new stance is very much to be welcomed and is likely to be applauded by all private investors.
Responding to the FRC's consultation paper 'Effective Company Stewardship: Enhancing Corporate Reporting and Audit' in March 2011, UKSA rejected the FRC's suggestion that it should add to the responsibilities of auditors, because our great concern is that auditors are failing to do what is already required. UKSA reminded the FRC that auditors are required by the Companies Act to report to the owners of companies and that this prime requirement should take precedence over all other considerations. We argued that this was unlikely to be achieved by a closer relationship with a company’s directors and greater professional scepticism does of course imply the exact opposite.
This most welcome step by the APB is but one stage in what UKSA regards as necessary reform. Ultimately, true satisfaction from the audit process can only come about if auditors are made properly accountable to shareholders, for which UKSA will continue to press.