Corporate Governance

KPMG in the UK has been one of the leaders in the debate for sensible reform to corporate governance, for independent regulation, a principles-based approach to independence, for transparency, for liability reform and for the highest quality in financial reporting within a framework that promotes competitiveness. The UK and other governments have reacted to the Enron collapse in calling for better regulation and more power to audit committees to ensure auditor independence and improved corporate governance.

KPMG supported the recently enacted Companies (Audit, Investigations and Community Enterprise) Act 2005 aimed at protecting Britain against Enron style corporate scandals and supports the UK’s Draft Companies Bill and the broad thrust of the EU eighth Company Law Directive.

The availability of audited, reliable financial information to investors, banks and the public is a fundamental requirement of today’s global capital markets. KPMG recognise that in the current environment, good corporate governance and the highest ethical standards are essential to sustaining faith in our capital markets.

To this end KPMG in the UK supports:

• Moves towards convergence around International Financial Reporting Standards (IFRS) and International Standards on Auditing (ISA) to promote the highest quality of accounting and audit services and consistency across the globe and to reduce the costs to public companies and the barriers to new entrants into the global market.
  
  
• Independent regulation and oversight of auditors of public companies with, where appropriate, statutory underpinning, but working in collaboration with professional bodies.
  
  
• Greater transparency of audit forms particularly regarding quality control procedures
  
  
• Good corporate governance, including the establishment or enhancement of audit committees comprised on non-executive directors responsible for the overall integrity of financial reporting and also for processes to ensure that auditor independence and objectivity is maintained.
  
  
• The new auditor independence framework established by the International Federation of Accountants (IFAC) and adopted by many jurisdictions to suit local circumstances including mandatory rotation of the lead audit partner, a clear break before an audit partner can join a client and a principles-based approach to safeguarding against threats to independence by the supply of some non-audit services.
  
  
• Continued competitiveness within the business and professional services marketplace that can offer public companies wide choices among multi disciplinary practices (MDPs) and niche suppliers. This can be best achieved through an internationally agreed framework and the operation of the market, not through mandatory firm rotation or extra-territorial or restrictive or protectionist measures.