How much more work should auditors do for quoted companies? How comfortable are shareholders with the potential for further dilution of the independence of the annual audit? We don’t have the answers immediately to hand, but responses to the Federation of European Accountants’ (FEE) latest discussion paper on the potential role of auditor’s assurance in respect of corporate governance statements might be instructive.
There is already considerable concern amongst investors that non-audit services provided by the audit firm for example, executive compensation, HR, board evaluation or even internal audit, create an overwhelming conflict of interests detrimental to shareholder protection. Nevertheless, FEE is looking at how auditors can extend their role into governance assurance.
FEE’s paper looks into the key legal and regulatory requirements for governance reporting by European companies and, in its words, seeks to:
- explain the different levels of potential auditor involvement with different types of corporate governance disclosures, together with the required involvement with the disclosures required by EU law;
- explain FEE’s views as to the potential maximum involvement of the auditor with different types of corporate governance disclosures; and
- provide some examples of how auditors might report on their involvement.
FEE concludes that: “The involvement of a suitably qualified independent auditor (whether the auditor appointed to audit the company’s financial statements or another independent and suitably qualified practitioner) can increase the degree of confidence of users of corporate governance information.”
Comments on the paper can be sent by e–mail to hilde.blomme(at)fee.be