Investor group in rethink over auditor rotation
(Guardian (UK) Via Acquire Media NewsEdge) Britain's biggest investment groups are divided over whether companies should be made to switch auditors after several leading fund managers joined calls for contracts that limit audit terms to 15 years.
The Institutional Investor Committee (IIC) has revised its position on auditor rotation to reflect increased unease about cosy relationships between auditors and company management.
The IIC represents the National Association of Pension Funds (NAPF), the Association of British Insurers (ABI) and the Investment Management Association (IMA), whose members control pounds 4.3tn of assets.
Its December 2012 paper supported compulsory tendering of the auditors' contract every 15 years but in an update on its stance, the IIC said: "Investors are concerned that, where auditors hold office for long periods, this can affect their independence and objectivity, which are vital in ensuring audit quality. However, the IIC has not reached a consensus on the merits of mandatory auditor rotation."
Will Pomroy, NAPF's corporate governance lead, said Legal & General, Axa and Allianz were among big fund managers that now supported compulsory rotation. The EU has proposed requiring audit firms to rotate every six years.
Pomroy said: "Before, it was mainly pension funds that supported it, but now more institutional investors are getting behind it. We are not convinced that either partner rotation or more regular tendering are sufficient."
The UK Competition Commission's inquiry into the audit market initially favoured compulsory rotation but the commission backtracked last month and opted for tendering at least every 10 years for FTSE 350 companies.
(c) 2013 Guardian Newspapers Limited.
[ Back To Technology News's Homepage ]