Brydon review calls for separation of auditing from accounting
The year-long independent review, looking into how the audit process could be improved, has been completed, with a list of recommendations made to better serve the needs of users.
The review, led by Sir Donald Brydon at the invitation of the government, has culminated in a report with 64 recommendations, among which is the establishment of a new corporate auditing profession with a unifying purpose and set of principles.
The review suggests that auditing is too important to be left to an adjunct of another profession, and that as such it should be a profession removed from accounting.
“I recommend that Audit, Reporting and Governance Authority (ARGA) should facilitate the establishment of a corporate auditing profession based on a core set of principles,” the report reads.
“ARGA should be the statutory regulator of that profession. In doing so, I recommend that ARGA develops a coherent framework for corporate audit that includes but is not limited to the statutory audit of financial statements.”
It also makes recommendations in relation to:
- the prevention and detection of material fraud;
- communication and transparency within the audit process and audit report;
- the role of shareholders and other stakeholders;
- reporting by companies on their approach to assurance and resilience; and
- the effectiveness of companies’ internal controls over financial reporting.
The recommendations are aimed primarily at the audit of public interest entities (listed companies, and credit and insurance firms) in accord with the review’s terms of reference.
In its response to the review, the FRC said that it will study the report “with interest”.
Many of his recommendations, if accepted by the government, will have significant implications for the FRC in respect of its activities and resource requirements.
“We have already implemented a number of the recommendations of the independent review of the FRC and anticipate being involved in delivering the broader reforms to the UK audit market that the government has initiated,” the FRC said.