Audit (Hansard, 10 December 2003)

§ Mr. Stephen O'Brien
To ask the Secretary of State for Trade and Industry what discussions she has had with(a) UK firms and (b) representatives of the accountancy profession on the decision to raise the audit exemption threshold to £5.6 million; and if she will publish the minutes of such meetings. [140884]

§ Ms Hewitt
On 11 July 2003 the Government published a consultation document on the proposal to increase the audit exemption threshold. The consultation document was sent to some 870 organisations, businesses and individuals, including UK firms and representatives of the accountancy profession. There were 90 responses of which 35 were from UK firms and II from bodies representing the accountancy profession. A summary of the responses is available on the Department's website at http://www.dti.gov.uk/cld/ published.htm

§ Mr. Stephen O'Brien
To ask the Secretary of State for Trade and Industry what estimate she has made of the change in cost to UK businesses of the reduction in the timescale for rotation of audit partners from seven to five years. [140885]

§ Ms Hewitt
The regular rotation of audit partners plays an important role in upholding auditor independence. The Government welcomed the recommendation by the Coordinating Group on Audit and Accounting Issues (CGAA) last January to reduce the timescale for the rotation of the lead audit partner from seven to five years. The professional audit bodies implemented the recommendation immediately through revised guidance. They pointed out that audit firms would incur some costs in terms of familiarisation and planning (which would vary according to size of firm) in moving to the new five year cycle, but agreed with the CGAA that, as the requirements only relate to firms that are auditing listed and public interest entities, the benefits in terms of safeguarding auditor independence from the client outweighed any such transitional costs.
Meanwhile the Auditing Practices Board have drafted a new ethical standard which formalises the reduction from seven to five years, and are currently consulting on this and other ethical standards.