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Accountancy Reform: Shining a light on the auditors

The Economist

In the wake of the most recent financial meltdown, calls to reform accounting have grown particularly loud in both America and the European Union. Legislators are expected to introduce new rules with the intent to enhance auditors’ independence.

In America, the Public Company Accounting Oversight Board outlined three policies it expects to implement by the end of the next year. The first policy focuses on making audit reports more useful by requiring a section that focuses on “critical audit matters”, which is defined as how the audited business has valued its intangible assets. The second policy focuses on cutting the share of an audit that accounting firms can outsource without disclosure from 20% to 5%. The final proposed reform policy would identify the lead partner responsible for each audit. The final policy is the most controversial due to the implications of a lead partner putting their reputation on the line for every audit they oversee.

For more details on the proposed policy reforms and its potential implications, please click here.

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