The IIC shifts position on audit

I won't rehearse the issues around this one as have blogged previously about it. Just to say I think the IIC's update on its audit paper is a step forward. The position adopted by a previous IIC paper did not reflect all investor opinion - which is split on the issue of mandatory rotation -  though the updated version issued in Dec 2012 does acknowledge differing views.

The problem, as I've mentioned before, is that some in the auditing business rather naughtily used the Dec 2012 IIC paper to suggest that the body - and investors generally - were opposed to mandatory rotation. eg -

the UK’s Institutional Investor Committee – made up of representatives of from the Association of British Insurers, the Investment Management Association and the National Association of Pension Funds, which together manage or own £4 trillion of assets – set out in a paper in December 2012 clear opposition to mandatory rotation.

Therefore it is helpful that the IIC makes clear that it "has not reached a consensus on the merits of mandatory auditor rotation."

Full blurb below

Update on IIC Audit Position Paper

UK institutional investors continue to believe that ensuring a high quality of audits is vital in ensuring that markets value and trust the information reported. As set out in the December 2012 paper, investors support the objectives of the European Commission's proposals to safeguard auditor independence and objectivity and to improve the communications between auditors, audit committees and shareholders.
Investors are concerned that, where auditors hold office for long periods, this can affect their independence and objectivity, which are vital in ensuring audit quality. However, the IIC has not reached a consensus on the merits of mandatory auditor rotation.
The December 2012 IIC Position Paper remains reflective of UK institutional investor views on the remainder of the EU proposals.

From here