Our Financial Reporting Expert Group contributed to our response to follow-up questions posed by Sir John Kingman, as part of his independent review of the Financial Reporting Council, regarding arrangements for auditor procurement and remuneration.
We commented that changing the appointment of auditors would represent a major change in the relationship between companies, their shareholders and auditors, which needed to be carefully considered.
We noted that as companies are owned by their shareholders, it is they to whom auditors are responsible. If another body were to be responsible for appointing auditors, it would follow that the auditors would be accountable to the new body. The suggested solution would therefore not address the issue identified.
However, we remarked that if the government were to proceed with this approach, we recommended that such an arrangement be limited to listed entities on the FTSE 100, as this is where the largest risk lies. We emphasised that expanding this to all public interest entities and all listed entities regardless of size would be highly disproportionate.