Labour launches Big 6 auditors reports
Labour launches independent reports on how to reform our broken auditing and corporate governance regulatory system.
Today Labour welcomes two independent reports, Reforming the Auditing Industry and Regulatory Architecture to enhance Democracy and Business Accountability.
Under Labour, the big six accountancy and auditing firms will not be allowed to continue to act like a cartel, driving down standards, damaging the wider economy, and our business community will look closely at all of the report’s recommendations.
The Regulatory Architecture to enhance Democracy and Business Accountability report examined for the redesign of regulatory architecture. Recommendations included:
- The regulatory system must be independent of all government departments so that Ministers cannot sabotage investigations or prevent publication of critical reports.
- Regulators must be independent of those who are to be regulated.
- Regulatory bodies must have clear objectives as well as their scope and powers defined by law.
The Reforming the Auditing Industry report includes recommendations that:
- Statutory auditors of large companies and other entities must act exclusively as auditors.
- The audit business of accounting firms must be legally separate from everything else, with no cross holdings.
- Auditors and their associates cannot sell any non-auditing services, with the exception of delivering statutory returns, to audit clients.
- A statutory state-backed body must be created to conduct real time audits of banks, building societies, credit unions, insurers and major investment firms.
- An independent body to be created to appoint and remunerate auditors for all non-financial sector large companies, as defined by the Companies Act 2006.
- Large companies must be required to change audit firms, partners and entire audit staff at least once every five years and audit tenders must be publically available.
Rebecca Long Bailey, Shadow Business Secretary, commenting on the report, said:
“Our regulatory system is simply not fit for purpose and the Tories have shown no interest in tackling the accounting and auditing shortcomings which led to the catastrophic collapse of Carillion.
“These reports highlight the scale of the problems facing the auditing and regulatory systems, Labour will look closely at the their recommendations.”
John McDonnell, Shadow Chancellor of the Exchequer, commenting, said:
“These reports are certainly a damning description of the current auditing and regulatory regime, which has given us corporate scandal after corporate scandal.
“Labour will be examining them carefully and will lay out our proposals for shaking up the whole system.”