The Effective Board
Audit Review February 2013
The Competition Commission’s enquiry into Statutory Audits has involved in-depth
qualitative and quantitative research1. Because this focused on Finance Directors or
equivalent (FDs) and Audit Committee Chairs (ACCs) their divergence of opinions is a
fascinating bi-product of the results. This paper explores the nature and extent of this
divergence in four crucial areas:
1 Audit quality vs. cost
2 Assessing audit quality
3 Influence in auditor selection
4 Auditor selection criteria.
It highlights the FDs focus on cost, efficiency and operational aspects against the ACCs
governance role focussing on audit efficiency, quality of the audit team and reliability
of accounts. While FDs are less bothered about the audit report and want a smooth
audit the ACCs see conflicts and challenges as a potentially healthy sign.
Is this a wasteful conflict or useful counterbalance ensuring better governance? And,
should the divergence narrow or expand as more ACCs focus on stronger governance
and greater adherence to the FRC’s Code?
This paper argues that divergence creates the proper counterbalances that large
businesses need and that, in the next few years, these differences in emphasis may
grow as FDs focus on financial performance and ACCs focus on stronger governance.
All stakeholders should broadly take comfort that ACCs are acting as guardians of their
interest, whilst FDs are looking to maximise financial performance.
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