The Auditing Practice Board

The Auditing Practice Board

- in Business Studies

The auditing practice board has published guidance for auditors on the combined code on corporate governance and its application in relation to the financial services authority’s listing rules.

Introduction of new ethical standards from the auditing practices board (APB) has provided new rules and regulation amongst the accountancy bodies to reach these standards. Auditors have no choice but to apply the ethical standards in their working lives. The main concern of many practitioners is whether the new rules will prevent them from offering certain services to certain clients.

Over the past ten years the audit committee has become more involved for any company that takes corporate governance seriously, although in most cases, they have maintained a low profile.

All listed companies have to set up an audit committee to oversee the auditors work and to act as intermediaries between the auditors and the board of directors. The combined code, the UK’s corporate governance guidelines, says that the audit committee should be composed of at least three non – executive directors who should review the audits and its cost-effectiveness, as well as monitor the auditor’s independence and objectivity. Most are chaired by a senior non – executive director and have anything from three to seven members who have between them an experience of financial, legal and operational roles. The audit committee has traditionally listened to the auditor’s concerns and if the auditor needed more co-operation from the company it would lean on the directors.

The combined code is the financial reporting council’s code of corporate governance. It contains general principals and more detailed provision related to the corporate governance of listed companies. The combined code was updated in 2003 to incorporate recommendations from reports on the role of non – executive directors and the role of the audit committee.

In terms of those companies they must include in their annual reports how they apply the codes principals or comply with its provision, where they do not comply they must provide an explanation: the combined code on corporate governance identifies good governance practices, however in terms of the companies they may wish to adopt a different approach in their own ways if that is more appropriate to them. There is a strong and direct link between the company itself and the shareholder of the company, the board members of a company are always welcomed to engage in corporate governance matters.


In terms of looking at the conceptual framework, this is used assist the IASC in the development of future international accounting standards and in its review of existing international accounting standards. This may also include assisting the board of IASC in promoting accounting standards and procedures relating to the presentation of financial statement by providing a basis for reducing the number of alternative accounting treatments permitted by IAS’s.

The corporate governance framework operates at a number of levels. There are some areas where for example, parliament or the financial service authority has decided that it is appropriate to impose requirements on companies.

However, there is also a widespread agreement that there is an important role for a generally accepted code of best practice and the combined code has fulfilled this role since 1998. In terms of looking at comparative studies, they show that the UK outperforms other countries in terms of setting governance standards, the issue based on cost are also lower than in other countries. Therefore the UK has more advantage over other countries. The code of best practice is seen to be a vital in terms of getting it right and having the rules in place which are governed and regulated by a professional body.

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