Audit Committee Report voting – have your say
We're seeking the views of members on the debate around introduction of a vote on the Audit Committee Report.
In October 2013, the Competition and Markets Authority (CMA, formerly the Competition Commission,) issued its final report on the provision of statutory audit services to large companies in the UK. This report contained several recommendations, one of which was as follows: "An advisory vote should be introduced on the Audit Committee Report."
The CMA subsequently published its Order to implement some of its recommendations in September 2014, but this particular remedy did not feature.
On 28 September 2015, the Financial Reporting Council (FRC) published its consultation paper "Enhancing Confidence in Audit". This consultation paper includes proposed changes to auditing standards, ethical standards, the UK Corporate Governance Code and the supporting Guidance for Audit Committees.
These proposed changes mainly relate to implementing the requirements of the 2014 EU Audit Legislation into the UK, but there are other matters which are covered.
One of these other matters is included at section 4 of the FRC's consultation paper. This relates to the CMA's recommendation from its final report on introducing an advisory report on the Audit Committee's Report.
The FRC notes that: "The CMA considered that its introduction would increase the audit committee's incentives to discharge their responsibilities in the interests of shareholders, in particular to assess the effectiveness of the external audit process and the approach taken to the appointment and reappointment of auditors."
However, the FRC is not minded to introduce such a provision into the UK Corporate Governance Code on the basis that it "considers that shareholders already have sufficient rights to express their opinion on the Audit Committee Report either by the annual re-election of the directors, which includes the audit committee chairman, or by tabling a specific shareholder resolution. Both companies and investors have indicated to the FRC that this is an unnecessary step at this stage".
ICAS is seeking the views of members on this matter to help inform our response to the FRC. Please forward any views to James Barbour, Director, Technical Policy.