Sir John Kingman's inquiry into the audit industry made a whopping 83 recommendations
Sir John’s inquiry identified so many flaws with the current set-up that he proposed a whopping 83 recommendations. One problem is that thehas no clear statutory duties or powers. If it wants a company to restate its accounts, it must seek a court order. Bizarrely, it can take action against a company’s directors only if they are qualified accountants. Sir John also worried that the regulator has been too close to the accountants.
It seems sensible to create a more muscular regulator with a clear purpose. But Karthik Ramanna of Oxford University argues that cosiness is always a risk, given the close-knit nature of the audit industry. Continued public scrutiny could remind both auditors and their regulator of their responsibilities to investors and to society. It might help thatwas hauled in front of lawmakers only after things had gone wrong.
Mr Clark plans to press forward with the proposals after a few weeks’ consultation. And with other reviews into the audit industry under way, further changes are still to come. The Competition and Markets Authority is investigating ways to invigorate competition in the sector, which could include splitting accounting firms’ auditing arms from their consulting businesses, and forcing the Big Four to conduct joint audits with challenger firms.
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