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Audit Quality

The Government is keen to encourage confidence in the statutory audit and to ensure a strong, competitive and high quality audit market. To help in this over the course of the past couple of years the Government has promoted debate to identify further ways by which these goals can be achieved.

The Audit Quality Forum brings together representatives of auditors, investors, business and regulatory bodies. Its purpose is to encourage stakeholders to work together by promoting open and constructive dialogue in order to contribute to the work of government and regulators and by generating practical ideas for further enhancing confidence in the independent audit.  The government will work with the Financial Reporting Council (FRC) to consider how proposals that enjoy broad support of the forum can be taken forward.

Four specific proposals have been included in the Company Law Reform Bill with provisions relating to Auditor Liability:

· Publication of audit engagement letters
· Publication of audit resignation statements
· Audit lead partners signature on reports
· Shareholders rights to question auditors

A fifth workstream was added later to cover:

· Competition and choice - to consider the issues surrounding competition and choice in the audit market place.  

The process of considering improvement to audit quality is on going. All parties involved agreed that reform should comprise three key parts, short term implementation of selected improvements to the audit process; the establishment of an on going dialogue by which further enhancements to audit quality can be identified, and legislating to permit auditors to contract with their clients to limit liability.

The forward work programme covers:

· The audit purpose
· Principles based auditing standards
· Auditor reporting
· Third Party Advisors
· Making global reporting standards local.