The majority of audit committees on UK listed companies fall short of best practice in their reporting, according to a new report by accountants BDO LLP and the Institute of Chartered Accountants in England and Wales.
James Roberts, senior audit partner, at BDO LLP, said: “Like the auditor, the audit committee is a guardian of trust.
“It’s widely agreed that there has been a loss of faith in corporate governance following the financial crisis, so it’s essential that audit committee reporting gravitates towards the best examples seen in our research.”
The survey found that only 33 per cent of audit committee reports include details about the effectiveness of external auditors and how this has been assessed.
A similar number, 32 per cent, of reports refers to the provision of non-audit services by auditors.
The report claimed that shareholders receive inconsistent information, with little explanation as to how audit work is tendered for, nor the length of an auditor’s tenure.
The UK Corporate Governance Code states that the audit committee should have primary responsibility for auditor appointment, reappointment and removal.
The report analysed how 237 listed companies reflect the work of audit committees in their annual reports and reviews the quality of audit committee reporting
The report found some “excellent examples of best practice” – notably where audit committee chairs penned separate committee reports themselves.
“UK corporate governance sets the standard worldwide, but audit committee reporting is short of where the regulators want it to be in the future,” said Mr Roberts.
“Inconsistent quality and boiler-plating does nothing to reassure investors and our research highlights the significant divide between what is expected of audit committees and where many actually are now.”
Vanessa Jones, head of corporate governance at the Institute of Chartered Accountants in England and Wales, said: “There are some great examples of audit committee reporting, but our research indicates that there is scope for improvement.”