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Press Release

Wednesday 28 March 2012

AUDIT REFORMS ARE NEEDED BUT THERE SHOULD BE A MEASURED APPROACH

The Investment Management Association (IMA) has told a European Parliament committee that certain of the European Commission’s proposals on audit reform go a step too far.  While the IMA believes that a number of the proposals are welcome there is concern that others will not address the issues identified. 

Mandatory rotation could hinder rather than help audit quality. If a company is undergoing significant change, such as a major acquisition, it may be better to remain with the current provider. The IMA also questions whether mandatory rotation will succeed in opening up the market as it is likely that companies will simply switch to another “Big Four” provider. A more measured approach would be for the audit to be tendered every 10 years on a “comply or explain” basis in a framework where there is more accountability to shareholders.
    
We agree that measures are needed to control the level of non-audit services provided by a company’s auditor, as they can impact the auditor’s objectivity and independence.  But the proposed limit of 10% of the audit fee for “related financial audit services” is too restrictive. In addition, banning large firms from providing non-audit services could make it difficult for them to attract and retain high calibre staff which could, in turn, have an adverse impact on audit quality.

Giving evidence to the European Parliament’s Legal Affairs Committee, Liz Murrall Director of Corporate Governance said:

“We welcome a number of the reforms.  However, some of the proposals, particularly those on mandatory rotation and audit only firms run the risk of reducing rather than improving audit quality.  

“It is vital that the package of reforms enjoys the support of the investment community – the real end clients of the audit process.”
 

-ENDS-

Read the full speech here.

For further information please contact:

Christina Bridge, Press Assistant - 020 7831 0898
Mona Patel, Head of Communications - 020 7831 0898 or 07834 089332
Navdeep Sidhu, Press Officer - 020 7831 0898 or 07843 517618
Email: press@investmentuk.org

Notes for Editors

The IMA is the trade body for the UK's £4 trillion asset management industry. 

The money its members manage is in a wide variety of investment vehicles including authorised investment funds, pension funds and stocks and shares ISAs. 

Our purpose is to support and promote a commercially successful and growing UK investment management industry as we seek to improve the financial outcomes for customers - savers and investors.

IMA website - www.investmentuk.org

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