FRC consults on changes to the Audit Firm Governance

The Audit Firm Governance Code, which oversees transparency and quality, is undergoing a consultation by the Financial Reporting Council (FRC).

This new consultation reflects feedback from investors and other respondents who took part in the first consultation review earlier in the year.

Primary role

The main area for debate was that the purpose of the Code itself should be clarified. Other suggested primary roles were audit quality and the promotion of good governance across firms as a whole.

Feedback revealed that the role of independent non-executives was so important that it should be strengthened in some areas, particularly regarding how they report to investors about their work and views on performance.

Another major concern from respondents was that firms should consider adopting provisions of the Corporate Governance Code that are not currently in the Audit Firm Governance Code.

Enhancement in governance

Stephen Haddrill, CEO of the FRC, said that the major firms who have put significant effort into adopting the key provisions of the Audit Firm Governance Code have seen an enhancement in governance.

"Above all it creates, through the independent non-executives, an independent voice and challenge at the heart of the firms, which is of particular importance in view of their public interest responsibilities," Haddrill explained.

"The proposed new provisions will strengthen this voice further, provide clarity about the Code’s purpose particularly in relation to audit quality and encourage further transparency to investors," he added.