Audit firms agree to governance code

THE STATE’S biggest accountancy firms have agreed to appoint independent non-executives to their boards to improve oversight and governance into their audits of “public interest entities” such as banks and quoted companies.

The firms have signed up to a new code published by the Chartered Accountants Regulatory Board (Carb), the industry’s regulatory body, under which they will appoint the independent non-executives from next year to oversee auditors of “public interest” firms.

The big four firms of PricewaterhouseCoopers, KPMG, Ernst Young and Deloitte have signed up to the Irish Audit Firm Governance Code, which was agreed last week. It will also apply to Grant Thornton, BDO, Mazars and Horwath Bastow Charleton.

The code is similar to one introduced in Britain last year, although the Irish guidelines go further by seeking the appointment of non-executives to auditors of “public interest entities” and not just publicly quoted companies.

Heather Briers, director of Carb, said the firms could pick their own candidates but that it would review these appointments in 2014 to see that they were “appointing the right calibre of people and taking it seriously”. The aim of the code was to create a “greater degree of transparency into how audit firms operate”.

The code does not say that candidates have to be from an audit background. “We haven’t said they cannot be auditors, but firms have to look at the independence and competence of the people.”

The big accountancy firms have been criticised for failing to identify the risks within banks in their annual audits of the lenders.

Ms Brier said Carb was due to write to the Director of Public Prosecutions this month for an update on her request that it adjourn disciplinary hearings into four members of the Institute of Chartered Accountants in Ireland, including former Anglo Irish Bank executives Seán FitzPatrick, David Drumm and Willie McAteer, and Ernst Young, which audited the bank, arising from an investigation into matters relating to Anglo.