FRC Recommends Shareowner Involvement in Choice of Auditor

The Financial Reporting Council, the UK financial reporting watchdog, wants shareholders to have more say in choosing the firms which audit corporate accounts.

The suggestion is among a raft of ideas the FRC is putting forward for debate in a bid to improve corporate reporting in the wake of the financial crisis. The FRC argues annual reports have become too cluttered, reducing their value for investors.

“There should be greater investor involvement in the process by which auditors are appointed,” the FRC said.

“We recognise that although shareholders confirm auditor appointments, management is perceived to determine the appointment (or reappointment) and remuneration of auditors and that, therefore, auditor independence is compromised.

“There is a case for the independence of the decision to be reinforced by the Audit Committee seeking greater shareholder involvement.” The comments come in the new Effective Company Stewardship: Enhancing Corporate Reporting and Audit report

There are two options. Either company audit committees should be required to explain why they appointed the auditor, or they could discuss the appointment “with a number of principal investors”- and then report on that consultation to shareholders generally… Responsible Investor.

There is, of course, a third option. Shareowners could select the auditor from a group of qualified contenders. For more on that option, see Proxy Voting Brand Competition by Mark Latham.

, ,

Comments are closed.

Powered by WordPress. Designed by WooThemes