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Institutional Investors Get Serious About Audit

Posted on September 17, 2012 at 11:35 AM

More than a dozen institutional investors and investor associations managing £732bn of funds in total should be a force to be reckoned with. Let's hope so, as their efforts could have implications for listed companies across the EU.

Believing that auditors played a major part in the failure to give due warning of imminent bank collapse in the financial crisis, their demands have hardly been revolutionary - one of them has been that listed companies change audit firm at least once every 15 years to avoid excessive cosiness.

The EU was looking at mandatory rotation every six to nine years, but I'm not sure what happened with that. I know form today's story in the FT that a European Parliament committee is now to discuss easing this to once every 25 years. They really cannot be serious.

And yet they obviously are. Audit reform may appear to be a cure for insomnia, but shareholders everywhere need to pay attention and stay awake. It is to be discussed this week by the European Parliament's legal affairs committee. 

An excellent letter to the editor in the FT from three of the signatories - UK pension fund the Universities Superannuation Scheme, Legal & General Investment Management and Third Swedish National Pension Fund says it all and if you have access to FT.com you can read it here.

Categories: Governance, Accountability, Scrutiny