§ Mr. Mitchell
To ask the Secretary of State for Trade and Industry if he will propose legislation which will prevent auditors acting as consultants for their audit clients.
§ Dr. Howells
We have no plans to do so.
It is central to the role of the company auditor that he or she is independent in mind and in appearance. The provision of non-audit services to audit clients can call into question the auditor's independence of the entities being reported on. It will be appropriate for the new Ethics Standards Board, when it is established as part of the new independent Framework of Regulation for the accountancy profession, to look at the ethical rules and guidance in this area.
The law in the UK already requires that the bodies responsible for supervising the work of company auditors have adequate rules to ensure that the auditor does not have an interest likely to conflict with the proper conduct of the audit. The current professional guidance, which forms part of those rules, acknowledges that the provision of non-audit services may give rise to threats to independence. The auditor is required to put in place appropriate safeguards and to be able to demonstrate that he or she has reasonably concluded that those safeguards are adequate. Otherwise the auditor either cannot take on the audit engagement or cannot provide the non-audit service.