The Association of Investment Companies (AIC) has welcomed the government’s publication of “Restoring trust in audit and corporate governance.”
Richard Stone Chief Executive of the Association of Investment Companies (AIC) (pictured) said: “We welcome the government’s announcement of these long-awaited plans to re-establish trust and confidence in the UK’s audit and corporate governance framework. Ensuring the UK remains a business and investment leader is essential for the UK economy and high standards of corporate reporting and governance are critical to success.
“We have always felt uncomfortable about imposing additional constraints or obligations on the clients of audit firms to resolve competition issues in the audit market. As such, we welcome the government’s pragmatic approach to aspects of these proposals and in particular the government’s plan to work with the new regulator (ARGA) to implement an exemptions framework to allow some FTSE 350 companies to be excluded from the requirement to appoint a challenger audit firm. This exemptions framework needs to be suitably scoped so that it is effective in providing relief to those companies for whom this would be an unreasonable or unworkable burden whilst not undermining confidence in the overall regime. It is important that the focus remains on complex organisations, where failures have given rise to the need for these reforms, and that less complex entities are not unnecessarily burdened.
“We believe there are a number of reasons why the appointment of a challenger firm may not be practical or in the best interests of investment company shareholders. Typically, these companies are not complex and do not have subsidiary undertakings making a meaningful carve out of material aspects of the audit very difficult. It is important that FTSE 350 investment companies are excluded from the requirement to appoint challenger firms as sole or shared auditors.
“We look forward to working with the government and ARGA to ensure these audit and corporate governance plans work well in practice and lead to improvements in the market, without disadvantaging less complex entities such as investment companies.”