ACCA response to CC audit rotation report

Sue Almond, ACCA technical director, said: “We must not forget that the benefit to businesses needs to be at the heart of any audit reform and come first and foremost above any other considerations. These proposals from the Competition Commission provide an opportunity to strengthen the Financial Reporting Council’s existing recommendation for the biggest companies to put their audits out to tender on a 10 year basis, and with mandatory rotation likely to come from the European Union in the next few years anyway, introducing a five year requirement to tender right now (as the Commission had earlier proposed) would have caused a burden and confusion for businesses at a time when they need to be concentrating on their core business activities. It would have meant, potentially, the audit rules changing three times over a few years.

“Businesses have told us they don’t have a huge appetite for mandatory rotation, primarily because of the cost it entails and the disruption it causes. Investors are generally supportive of the principle of improved competition, but not supportive of mandatory short-term rotation, so the Commission’s proposals go some way in meeting those concerns.

“ACCA has consistently stated that we do not believe there is evidence to support the assertion that mandatory rotation increases (or decreases) audit quality, which is the key factor for the business community and the public interest. The auditor appointment should be the primary responsibility of the Audit Committee, who should make an informed decision based on the particular circumstances, but that should be a transparent process. However, public perception should not be overlooked here. An auditor in place for a very long time could be seen as no longer independent. The European Council's Committee of Permanent Representatives’ (COREPER) proposals for a 20 year rotation could be more beneficial for the business community.”