The ICAEW have released an 18 page document that codifies audit governance standards. Although adherence to the Code will be voluntary, compliance with the Code will be encouraged and a “comply or explain” system will be utilised by the ICAEW. The Code is designed for the UK’s eight largest audit firms and will place pressure on those firms to adopt many of the same corporate practices as their clients. The audit firms have welcomed the Code and are committed to implementing it. Sir Christopher Hogg, chairman of the FRC, “strongly encourage[d] audit firms and investors to grasp the opportunities the Code presents to strengthen their dialogue”.
The Code grew out of the fear of a Big Four collapse, which would leave as many as 20% of the 7,200 largest businesses in the G20 without an auditor. Some of the Code is already standard practice in many firms; for example, the use of non-executive directors, internal controls and whistle blowing policies, whilst other measures may require some change to practices.