The Future of Audit Contents



The effectiveness of audit

Conflicts of interest and auditor independence

Competition and resilience


1 Introduction

What are audits and why do they matter?

Parliamentary interest in the UK audit market

A crisis of trust in the auditing profession: key issues

Audit quality

Competition, choice and resilience

Conflicts of interest and the big four alumni

Regulation and guidance on audit matters

Previous attempts to reform the audit industry

The three reviews of audit

Our inquiry

2 The audit product

The ‘expectation gap’

Audit delivery gaps



A forward-looking product

Graduated findings

Widening the scope of audit

Shareholder engagement

Conclusions on the expectation gap and the audit product

3 Capital maintenance


The requirements

The accounting standards and the law




Solvency-based system

4 Separating audit from non-audit

The case for separation

Audit culture

Degrees of separation

Governance separation

Operational separation

Structural separation

Conclusions on separation

5 Fees

6 Ensuring independence, challenge and professional scepticism

The role of audit committees

Are audit committees independent and do they represent shareholders?

Audit committees and audit

Increasing regulatory oversight of audit committees

Other measures to ensure audit independence and challenge

Independent appointment of auditors by the regulator

Increasing the frequency of audit rotations

A cooling-off period for non-audit services after an audit engagement

Corporate hospitality for audit clients

7 Competition, choice and resilience

Levels of competition and choice in the UK audit market

Why are challenger firms not taking on more FTSE 350 clients?

The CMA’s market study into the statutory audit market

Mandatory joint audits

Auditing of banks

A market cap

Resilience measures

8 Regulation of audit

The Financial Reporting Council

Sir John Kingman’s Independent Review of the FRC

The Independent Review’s key proposals and the Government’s response

A new regulator: The Audit, Reporting and Governance Authority


ARGA’s new powers

ARGA’s proactive remit

Enforcement processes


Monitoring audit quality: Audit Quality Reviews

A UK Sarbanes-Oxley and the wider reporting eco-system

Registration of auditors by Recognised Supervisory Bodies (RSBs)

9 Conclusion

Conclusions and recommendations

Formal minutes


Published written evidence

List of Reports from the Committee during the current Parliament

Published: 2 April 2019