ArchOver has welcomed the recommendations from a government-commissioned report on audits.
This follows pressure from the UK Crowdfunding Association in August last year for the Financial Conduct Authority and Treasury Select Committee to investigate the role of auditors after the accounts were signed off for companies nearing collapse.
In December Sir Donald Brydon produced a 138-page report with 64 recommendations where he called for more informative audits, which has been supported by ArchOver.
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“Sir Donald makes a plea for auditors to move on from being mere checkers of compliance rules, making the important distinction between providing information and actually being informative,” ArchOver said in a blog post on its website.
“Interestingly – especially as, in a past life, he was chairman of the London Stock Exchange – he calls for better information to be available for a company’s shareholders and ‘other users’.
“I assume he means suppliers, customers and providers of finance, all of whom help in their own way to fund a business.
“That would include outfits like ArchOver, so his suggestion gets my vote – ‘vote’ being the operative word.
“Auditors are appointed by the directors of a company, but shareholders get to show their approval of the appointment by way of a vote at the AGM.
“Maybe ‘the others’ should have a vote, too, albeit on a weighted basis.”
Brydon’s other recommendations included the creation of a separate professional body to represent auditors within ARGA, the successor to the Financial Reporting Council.
He also called for auditors to produce more informative audit reports and to be trained in forensic accounting to improve the detection of fraud.
Auditors have been under scrutiny in the P2P sector recently. Companies House documents showed that the auditor of Lendy, Moore Stephens LLP, signed off the P2P lender’s annual accounts in August 2018, less than a year before its collapse.
“In the wake of some spectacular corporate disasters, the accountancy profession in general, and auditors in particular, have rightly come in for a lot of flak for their failure to rein in wayward and over-exuberant company directors whilst still pocketing the fees,” ArchOver said.
“Some of the suggested solutions have ranged from the sensible to the equivalent of a public hanging to appease the baying crowd (e.g. politicians).
“What is important for me, not just as a Chartered Accountant but as a director myself, is that whatever changes (from the report) are ultimately adopted, they represent change for the better not simply for blind retribution.
“Further, that the rules should apply to companies of all sizes – not just be aimed at constituents of the FTSE 100, but to our army of small- and medium-sized enterprises (SMEs).”