In a development that will destroy the secret society of Big 4 management in the UK, a “radical” governance code has been implemented that will require the Big 4 to appoint outside “independent non-executives” that will oversee “public interest matters; and/or be members of other relevant governance structures within the firm.”
According to the code, these new independent non-executives will make us all feel way better about what audit firms by “enhanc[ing] shareholder confidence in the public interest aspects of the firm’s decision making, stakeholder dialogue and management of reputational risks including those in the firm’s businesses that are not otherwise effectively addressed by regulation.”
But that’s not all! According to the introduction, “It should also benefit capital markets by enhancing choice and helping to reduce the risk of a firm exiting the market for large audits because it has lost public trust.” In other words, everyone still is freaking out about who the next Andersen will be. Apparently this “should” help your concerns by encouraging companies to consider other audit firms.
What a coinky-dink, Grant Thornton was just asking for help on this last week! Not really sure if this what they had in mind for but hey, beggars can’t be choosers, right?
The Financial Times claims that “Accountants broadly welcomed the move, although some in the firms’ international networks were unhappy about the possibility the UK code might pave the way for ‘creeping regulation’ worldwide.” In other words, people in the U.S. don’t like it one bit.
Plus, the FT didn’t quote any accountants that “welcomed the move”. The exception, of course, is the chair of the group, Norman Murray, who said that the new code was “‘as user-friendly as possible but seen to have some teeth.'” Not sure what that means but it sounds like he’s a believer.
Another member of the board, John Griffith-Jones, co-head of KPMG Europe, was less enthused. All he could manage was that he hoped that the move would put the “‘Enron query to bed.'”
Something tells us your hopes will be dashed, JGJ. Enron is the story that never ends. Especially in the MSM. Plus it’s on the stage now. Those tunes will be in your nightmares.
Auditors required to adopt UK code [FT]
audit firm governance code.pdf