Auditors (Hansard, 8 May 1990)

§ Mr. Austin Mitchell
To ask the Secretary of State for Trade and Industry if he will list the information that his Department collects about auditors and audit reports.

§ Mr. Redwood
My Department obtains copies of the lists of members published by the bodies recognised under section 389 of the Companies Act 1985, supplementing the information as necessary by consulting the body concerned. The Department also maintains a record of auditors who have been individually authorised by the Board of Trade or the Secretary of State. Audit reports delivered to the registrar of companies with company accounts are made available by Companies house for public inspection. In addition, my Department collects information about auditors and audits from a wide variety of sources, including the investigation of complaints, press reports, research studies, and contacts with the profession and users of accounts.

§ Mr. Austin Mitchell
To ask the Secretary of State for Trade and Industry whether he will take steps to ensure that the organisations seeking recognition as qualifying bodies under the Companies Act 1989 are required to have student observers on their councils.
60W

§ Mr. Redwood
No.

§ Mr. Austin Mitchell
To ask the Secretary of State for Trade and Industry whether he will announce the date by which any member of the public may object to the granting of supervisory status to any accountancy body.

§ Mr. Redwood
This will depend on when the supervisory body applies for recognition under part II of the Companies Act 1989, and how long it takes to determine the application, but I would expect the consideration of a body's application to take several months, which should give members of the public ample opportunity to make representations.

§ Mr. Mitchell
To ask the Secretary of State for Trade and Industry whether he will list the steps he is taking to reduce the influence in auditing policy-making bodies of accountancy firms criticised by the Department of Trade and Industry and the joint disciplinary scheme.

§ Mr. Redwood
If, as I assume, the hon. Member has in mind the Auditing Practices Committee, I refer him to the answers I gave to his questions on 27 November at columns 92–93, 18 December at columns 22–23, 21 December at columns 392–93, and 10 January at columns 634–35, when I explained that membership of that committee is a matter for the Consultative Committee of Accountancy Bodies.

§ Mr. Austin Mitchell
To ask the Secretary of State for Trade and Industry whether he will list the membership of the United Kingdom accountancy bodies incorporated by royal charters.

§ Mr. Redwood
Details of members are published by the chartered bodies of accountants, from whom up-to-date membership numbers are freely available on application.

§ Mr. Austin Mitchell
To ask the Secretary of State for Trade and Industry whether he will create a single independent organisation to regulate both accounting and auditing standards.

§ Mr. Redwood
No. The Government's attitude to this proposition has not changed since it was debated during the Committee stage of the Companies Bill last year.

§ Mr. Austin Mitchell
To ask the Secretary of State for Trade and Industry whether he will list the steps his Department is taking to bridge the expectation gap in auditing.

§ Mr. Redwood
In so far as the public expects auditors to safeguard their interests, the Government's legislation on the financial services sector (including insurance and banking) has already removed an obstacle which was seen as inhibiting auditors from reporting direct to the various regulatory authorities information relevant to the functions of those authorities. The forthcoming imple-mentation of part II of the Companies Act 1989 will introduce a new regulatory regime for auditors which will help to underpin the quality of auditing.
It is, however, primarily a matter for the auditing profession to consider how to respond to the public's expectations, and my Department welcomes and supports the relevant initiatives which the profession has taken (for example, its guidance on dealing with fraud) and is developing. It is equally incumbent on the public to inform itself of what auditors can and should reasonably expect to accomplish.
61W

§ Mr. Austin Mitchell
To ask the Secretary of State for Trade and Industry (1) whether he will take steps to ensure that all auditing firms auditing large companies would be required to participate in peer reviews;
(2) whether he will make it his policy to deny supervisory body status to any organisation under the Companies Act 1989 unless it offers arrangements for peer reviews.

§ Mr. Redwood
Under the Companies Act 1989, the Secretary of State may recognise a supervisory body only if, among other things, the body apears to him to have adequate arrangements and resources for the effective monitoring and enforcement of compliance with its rules. It will he for each supervisory body to set out the precise arrangements and resources through which it proposes to meet this criterion.

§ Mr. Austin Mitchell
To ask the Secretary of State for Trade and Industry whether, under the Companies Act 1989, he will refuse to grant supervisory status to any accountancy body which has continued to nominate individuals from the accountancy firms sued by the Government for negligence, criticised by the Department of Trade and Industry and the joint disciplinary scheme on audit policy-making organisations.

§ Mr. Redwood
No applications for recognition from supervisory bodies have yet been made. When applications are received they will be considered on their merits and in the light of the requirements laid down in part II of the Act, including the requirement that a recognised supervisory body must be able and willing to promote and maintain high standards of integrity in the conduct of company audit work.