Audit Committee Guidance Summary of Responses Oct 2008

FINANCIAL REPORTING COUNCIL A MENDMENTS TO GUIDANCE ON AUDIT COMMITTEES SUMMARY OF CONSULTATION RESPONSES O CTOBER 2008 SUMMARY OF THE MAIN POINTS RAISED BY RESPONDENTS Introduction 1. The Market Participants Group’s (MPG) report on ‘Choice in the UK Audit Market’, published in October 2007, contained four recommendations that were to be implemented, in full or in part, through amendments to the FRC Guidance on Audit Committees (formerly known as the Smith Guidance): • Recommendation 8: The FRC should amend the section of the Smith Guidance dealing with communications with shareholders to include a requirement for the provision of information relevant to the auditor selection decision. • Recommendation 9: When explaining auditor selection decisions, Boards should disclose any contractual obligations to appoint certain types of audit firms. • Recommendation 12: The FRC should review the Independence section of the Smith Guidance to ensure that it is consistent with the relevant ethical standards for auditors. • Recommendation 15: Major public interest entities should consider the need to include the risk of the withdrawal of their auditor from the market in their risk evaluation and planning. 2. Consultation on proposed revisions to the Guidance on Audit Committees was carried out between March and June 2008. The revisions proposed in the consultation document concerned the appointment of the external auditor and related ...