ICAEW’s Developing a meaningful Audit and Assurance Policy report follows the much-anticipated BEIS consultation on audit and corporate governance reform, which proposes sweeping changes for auditors and company directors.
The government’s white paper draws on the Brydon Review of the quality and effectiveness of audit and includes a proposal to introduce a statutory requirement on public interest entities to publish an annual Audit and Assurance Policy that describes the company’s approach to seeking assurance of its reported information over the next three years.
Based on research conducted for the report, ICAEW found broad support for a three-year rolling plan. 76% of respondents to a specific questionnaire on the issue believe such a policy could lead to increased trust in management and their actions, while 61% indicated that the policy should improve engagement with stakeholders beyond shareholders.
Interviewees from companies that took part in the research told ICAEW that introducing such a policy could make corporate information more informative, strengthen the understanding and value of audit and assurance activities, enabling them to meet the needs and expectations of key users, and make them more accessible to allow more appropriate decisions.
As part of the report, ICAEW examines the challenges companies may have to overcome when creating a meaningful Audit and Assurance Policy and outlines how they might be overcome. It also includes nine recommendations that will help a policy fulfil its potential.
‘Seize the moment’
Perhaps the key message is a call to action for UK plc to “seize the moment” to create a policy that builds on existing activities, rather than wait for the government’s proposals to come into force.
“There has never been more demand for trusted corporate information as stakeholders look to assess the impact of COVID-19 and climate change on business strategies,” commented Dr Nigel Sleigh-Johnson, Director of ICAEW’s Technical Strategy Accountability Group.
“Companies that publish and implement an Audit and Assurance Policy will provide their stakeholders with a more thorough understanding of their principal risks and instil greater confidence in the assurance activities in place to mitigate them.”
“We are pleased to see the idea reflected in the government white paper and would encourage UK businesses to take the initiative and create their own policies as a priority.”
ICAEW’s report encourages audit committees to own the Policy on behalf of the board, holding providers to the highest standards and telling a story that drives value and builds trust. It recommends the adoption of proposals for a regularly updated policy with a shareholder vote and also outlines that the policy must deliver clarity and transparency, avoiding boilerplate descriptions, and evolve as improvements are embedded.
While the government’s white paper introduces the policy as a requirement for Public Interest Entities, the report also stresses the benefits for a broad range of companies and organisations, encouraging them to recognise the potential value for all users and in particular providing clarity for regulators across many sectors.
Hear more on audit reform
You can hear more from Sir Jon Thompson at ICAEW's Virtually Live 2021. He will providing a keynote speech on the issue of audit reform and governance.
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