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The purpose of this paper is to investigate the jurisdictional expansion of audit into the area of UK financial regulation. The paper draws on the analytical framework of…
The purpose of this paper is to investigate the jurisdictional expansion of audit into the area of UK financial regulation. The paper draws on the analytical framework of new audit spaces (Andon et al., 2014, 2015), which built on the concept of regulatory space (Hancher and Moran, 1989), and characterises this new audit space as regulatory work.
Through an intensive reading of a variety of publicly available documentary sources, the paper investigates the role of auditors and accountants in the reporting accountants’ and skilled persons’ regimes in the UK under the Banking Act 1987 and the Financial Services and Markets Act 2000.
The paper identifies a new audit space characterised as regulatory work, which is made up of three distinct phases (and suggests the recent emergence of a fourth phase), and considers the extent to which these phases of regulatory work share common themes across new audit spaces identified by Andon et al. (2015) as independence, reporting, accreditation and mediating.
The paper identifies a further jurisdictional expansion of audit into a new audit space, characterised as regulatory work.
For more than two decades the framework governing the statutory audit of companies within the European Union (EU) has been the subject of debate and reform. Significant…
For more than two decades the framework governing the statutory audit of companies within the European Union (EU) has been the subject of debate and reform. Significant progress has been made with the publication of the European Commission (EC) Green Paper (1996), and the subsequent EC Conference (1997) and EC Communication (1998). The objective of this paper is to provide a commentary on the recent reviews of the regulatory framework for statutory audit at EU level in the context of ongoing developments. The paper concludes that the regulatory framework for statutory audit in the EU is far from complete and much remains to be done. The way forward, at least in the short term, relies on the accountancy and auditing profession taking the lead in finding solutions. The different nature of accounting, financial and legal traditions within the EU, and the need to search for consensus, however, makes it difficult to predict when the EC will be in a position to complete an internal market for audit services within the EU. A significant factor worthy of further consideration is that developments at the international level are in danger of outpacing the EU's ability to respond. Because of the size, power and adaptability of US financial markets, it is possible that US Generally Accepted Accounting Practices (US GAAP) and US Generally Accepted Auditing Practices (US GAAS) may become the dc facto global standards for listed companies.
This paper examines post‐Enron developments in UK audit and corporate governance regulation. It considers the latest government‐initiated reviews into audit regulation…
This paper examines post‐Enron developments in UK audit and corporate governance regulation. It considers the latest government‐initiated reviews into audit regulation, specifically those conducted by the Co‐ordinating Group on Audit and Accounting Issues and the DTI Review Team, and into corporate governance, specifically those undertaken by Derek Higgs and Sir Robert Smith. The paper notes that the reviews were undertaken in the context of developments initiated both before and after the collapse of Enron, including, respectively, the new system for the regulation of the UK accountancy profession as established by the Accountancy Foundation, and the US Sarbanes‐Oxley Act. The reviews have been welcomed by government and thus should play a large part in setting the agenda for the future regulation of UK audit and corporate governance. The proposals for auditing share a number of characteristics with the recommendations of a pre‐Enron empirical study which investigated the regulation of UK listed company audit, although significant distinctions remain. The proposals for corporate governance continue the ‘comply or explain’ approach and do not recommend passing its regulation from the Financial Reporting Council to another independent body of ‘stature’ such as the Financial Services Authority (FSA). It is concluded that key to successful implementation of recent proposals will be the need, for audit, to demonstrate that there is no cosy relationship between regulators and the auditing profession, especially the ‘Big Four’ firms, and, for corporate governance, a willingness to look outside the ‘one‐size‐fits‐all’ approach.
This paper examines latest thinking and new developments in the regulatory framework for statutory audit at European Union (EU) level. It follows an earlier paper…
This paper examines latest thinking and new developments in the regulatory framework for statutory audit at European Union (EU) level. It follows an earlier paper, published in this journal. Since 1999 when the paper was drafted, even more developments have occurred both at an EU level and in the USA, which are likely to have a significant impact on statutory audit in the EU in years to come. Latest developments are reviewed in three areas: profession related issues; company law issues; and, accounting and auditing standards. The paper concludes that significant advances have been made towards completion of the regulatory framework of statutory audit in the EU. What remains of concern is a lack of progress towards adoption of international auditing standards. Unless financial statements are both prepared and audited in the same way, it is difficult to see how financial information in the EU can ever be truly harmonised.
This paper reports the results of a postal questionnaire survey of UK primary stakeholders, members of the Institutional Fund Managers Association, as to the definition of…
This paper reports the results of a postal questionnaire survey of UK primary stakeholders, members of the Institutional Fund Managers Association, as to the definition of the expectations gap, its constituents, and the extent to which the expectations gap might be narrowed by audit regulation. The study revealed that fund managers were aware of the audit expectations gap and were particularly concerned about the scope and responsibilities of the auditor, and monitoring of auditors’ work. Fund managers agreed that increased regulation offered potential to narrow the expectations gap, especially as regards monitoring and discipline of auditors. The paper concludes that establishment of the Accountancy Foundation should provide greater independence to the investigation and disciplinary processes of the existing regulatory framework, and thus go some way to narrowing the expectations gap. Concerns may remain about its perceived independence of the profession and the lack of a specific obligation to investigate auditors’ work in circumstances of corporate failure.
Under the Financial Services and Markets Act 2000, the Financial Services Authority (FSA) is the single regulator of firms in the UK financial services industry. The Act…
Under the Financial Services and Markets Act 2000, the Financial Services Authority (FSA) is the single regulator of firms in the UK financial services industry. The Act grants extensive powers to the FSA such that it can impose by rules and regulations additional corporate governance requirements on firms in the financial services industry. The legislative and regulatory requirements also extend to individuals under the FSA approved persons' regime. The purpose of the paper is to examine this individualization of corporate governance.
The paper first explores the rise to significance of internal control and risk management in corporate governance and regulation, and links this to Beck's risk society and individualization theses. The extent of the individualization of corporate governance by the approved persons' regime is explored by examining three sources of evidence: the FSA's documents setting out the approved persons' regime; the initial perceptions about the implementation of the approved persons' regime from interviews with high‐level individuals in the financial services industry; and the outcomes of illustrative FSA enforcement actions against individuals.
The findings are that the FSA has developed a comprehensive and formidable apparatus for the individualization of corporate governance in the UK's financial services industry. It is argued that a discourse based on the interpretive evaluations of internal control and risk management may be replacing a discourse based on the quantitative techniques of management accounting, which may be characterised as the demise of the “calculating self” and the rise of the “auditable self”.
The FSA's approved persons' regime could be developed as a model for other areas of the private and public sectors, where for regulatory purposes it may be desirable to identify approved or official roles.
The ability of regulators to “make” corporate governance by rules and regulations is relatively unexplored. Also, the focus of corporate governance is on firms rather than individuals. The paper considers the extension of corporate governance from the firm to the individual that may be achieved by regulation.
Considers the impact of EDI on accounting systems, accounting, and on auditing. Indicates that the beneficiaries of EDI are mainly the powerful companies that initiate it…
Considers the impact of EDI on accounting systems, accounting, and on auditing. Indicates that the beneficiaries of EDI are mainly the powerful companies that initiate it, a point sometimes overloooked in the claims made for EDI. Finds that IT and business strategy did not appear to be integrated for these companies although they were able to extend their span of control through inter‐organizational systems beyond their organizational boundaries into areas where they do not need to be providers of capital. In turn this presents them with an additional control risk which needs to be addressed through a stronger managerial or internal audit function.
There has been widespread recent public debate about problems of corporate governance, accountability and audit regulation in the UK. In the arena of UK audit regulation…
There has been widespread recent public debate about problems of corporate governance, accountability and audit regulation in the UK. In the arena of UK audit regulation, the Auditing Practices Board’s publications, The Audit Agenda and The Audit Research Agenda, contain a discussion of audit regulation and call for research into the problem. This article reviews the “macro”, “micro” and “international” models for the regulation of audit that have already been proposed in the literature, and considers the appropriateness of the models to improve the regulation of company audit in the UK. The main conclusion is that while each of the models proposed have superficial attractions, there is a danger of considering them out of context. More research is needed into the practicalities, costs and benefits of the various models that have been suggested. Without such research there is a risk that any reform may not improve, or indeed may reduce, the effectiveness of the existing regulatory framework.
It has often been said that a great part of the strength of Aslib lies in the fact that it brings together those whose experience has been gained in many widely differing fields but who have a common interest in the means by which information may be collected and disseminated to the greatest advantage. Lists of its members have, therefore, a more than ordinary value since they present, in miniature, a cross‐section of institutions and individuals who share this special interest.