Buyers demand role in auditor choice

7 August 2002
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08 August 2002 | David Arminas

CIPS is pushing for purchasers to have a say in the appointment of auditors to cut the risk of Enron and Worldcom-style disasters in Britain.

Roy Ayliffe, the institute’s director of professional practice, has urged the government to include purchasers in any moves to revamp regulations for choosing auditors.

In a letter to Patricia Hewitt, the secretary of state for trade and industry, he says there are dangers when non-executive directors choose auditors without purchasing professionals’ help.

He wants to see “a cross-functional team of non-executive directors and a professionally qualified procurement specialist to ensure probity, transparency, minimisation of risk and value for money”.

Ayliffe’s letter comes as the Department of Trade and Industry considers changes put forward in the interim report by the government’s Co-ordinating Group on Audit and Accounting Issues. They include forcing companies to change their auditors every seven or eight years.

The report says accountancy firms should improve their openness by providing better information on processes and practices, and suggests restrictions on firms offering consultancy services to audit clients.

Peter Parry, a director with Sterling Consulting Group, said the report was “a wake-up call” to the purchasing profession.

“There needs to be more procurement people involved. Auditors should be tendered on a regular basis and every six years the contract should go to another accountancy firm.”

Mike Mari, associate director at consultancy Aria Group, said: “Involving purchasers will make the process appear transparent. Most auditors are appointed by the board of directors, with no set standards of performance taken into account.”

The Office of Fair Trading is considering the case for a competition inquiry into the “big four” accountancy firms - PricewaterhouseCoopers, Ernst & Young, KPMG and Deloitte & Touche - after the House of Commons Treasury select committee warned there is little real competition in the audit sector.

• Purchasers could face an unlimited fine and two years in jail if they fail to come forward with information for auditors. The DTI white paper, Modernising Company Law, obliges employees to give auditors information they believe is essential for an auditor to know, even if it has not been asked for.

SMaug2002

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