Auditors face fresh headache as shareholder adviser eyes industry
The world’s largest adviser to shareholders is to ramp up its scrutiny of auditors, in a move that will pile further pressure on the UK’s embattled beancounters amid a series of industry controversies.
Auditors will be facing another headache at their shareholder meetings next year after the Institutional Shareholder Services (ISS) today unveiled plans to track audit quality issues across Europe from 2019.
As part of the proposals, audit partners and companies involved in accounting disputes could be named.
In its auditor ratification paper released earlier today, the ISS said: “Where they are engaged in the audit for other public companies, this will be raised for investor attention — even if no audit concerns have been identified at the subject company.”
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The adviser added: “A negative recommendation on auditor ratification may be applied in the most severe cases, e.g. where the lead audit partner has previously been linked with a corporate failure scenario or other material destruction of shareholder value arising from fraud or other accounting issues.”
It is the latest sign of a crackdown on the auditing industry, coming in the wake of several hefty fines from the UK’s accountancy watchdog over the last 12 months.
Carillion’s collapse at the beginning of the year also dealt a huge blow to the reputation of the Big Four firms, all of which were in some way involved in working with the embattled construction company before its demise.
While Deloitte was Carillion’s sole internal auditor, KPMG serving as external auditor, EY gave turnround advice and PwC advised the company, its pension schemes and the government.