US and Britain Adopt Differing Approaches to Audit Shake-Up
Michael Harrison and Rupert Cornwell, The Independent (London, England)
TOUGH NEW rules to tighten the auditing and accountancy professions in the wake of the Enron and WorldCom scandals were unveiled yesterday on both sides of the Atlantic.
In the UK, the Secretary of State for Trade and Industry, Patricia Hewitt, told the Commons that she would consider launching a competition investigation into the stranglehold the big four accounting firms have on audit work.
Ms Hewitt also said there would be an early review of the regulation of the accountancy profession and set out plans to strengthen audit committees, introduce tougher mechanisms to ensure the independence of auditors and require companies to rotate their auditors.
In the US, the two chambers of Congress reached astonishingly swift agreement on a sweeping corporate reform bill - if anything tougher than either of the individual measures passed by the Senate and House of Representatives.
The bill could be voted on as early as today and signed into law by President George Bush by the end of this week. It calls for stricter oversight of auditors and more than doubles the maximum jail terms for white-collar crime.
The tightening of UK audit practices are in line with recommendations contained in an interim report to Ms Hewitt and the Chancellor from a Government review team set up in the wake of the Enron collapse.
The Co-ordinating Group on Audit and Accounting Issues recommended a strengthening in the role and membership of audit committees and further work to identify the types of consultancy work that audit firms should not be allowed to carry out for the same client.
The group, chaired by the Competition minister, Melanie Johnson, and the Financial Secretary to the Treasury, Ruth Kelly, also called for further examination of mandatory rotation of audit firms and more frequent rotation of lead audit partners. …