With a limited pool of talent on audit committees, Philip Smith considers the strengths and weakness of the current system and the influence of former Big Four partners on FTSE 100 companies both as AC chair and non-executive directors
Now that the arguments over auditor choice and competition have been settled, with the EU Audit Directive and Regulation passing into European law, the spotlight will move to the work of the audit committees of Europe’s largest listed companies. They will be the ones that will have to implement the directives once they are enshrined in local laws. And this is no more so than in the UK, in many ways ahead of the game following the results of its own competition authority’s recommendations on auditor rotation and regulation.
Over the last two years, and certainly since the Competition Commission (now known as the Competition and Markets Authority) published its own remedies for the FTSE 350 auditor market, there has been an avalanche of audits going out to tender. And it is of course the audit committees that are at the forefront of the re-tendering process as they decide whether to test the market and then review the auditors’ pitches.
