When we sent an email questionnaire to 3,000 readers of this magazine asking for your views and comments on the Enron scandal, we never imagined that, within hours, we’d have responses from almost 800 of you. So first of all, many thanks to all who took the time and trouble to share their opinions with us. ).
There is clearly some appetite for change among readers, with the compulsory rotation of auditors attracting most support. An outright ban on non-audit work being conducted by group auditors did not find favour. But, in both instances, the minority case was there in force: neither proposal was overwhelmingly endorsed or dismissed. One thing is clear, though: there will be a protracted debate about the role of auditors, the scope of audit, its value for money – and the job the directors are supposed to do (not forgetting the FD’s role as expert adviser to the board and audit committee).
It is a source of great concern to us, however, that we can hear the axle on the bandwagon groaning under the weight of people jumping on board.
It’s all to the good that these issues are properly discussed, but it is also apparent to us from our own detailed analysis of non-audit fees (see Financial Director, January 2002), that many companies are already acutely aware of the problems of ensuring auditor independence. Bad cases make bad law; knee-jerk reactions usually bypass the brain.
So we are in favour of the evolution of “best practice” rather than the imposition of more regulation to accommodate the concerns that investors, managements and auditors all share. But there must be strenuous efforts – and difficult debate – to ensure that best practice results in better governance and more value creation, not mindless box-ticking.