c) work effort and costs for audit committees, the companies and audit firms The primary focus by the Working Group was on: - Enhancing audit quality
- Reporting issuers
Reviewed background and potential benefits in each case before arriving at a consensus view - Alternatives to attempt to address institutional familiarity threats (long tenure of audit firms) were looked at in a continuum
- Continuum includes:
- Mandatory audit firm rotation
- Mandatory tendering
- Mandatory comprehensive audit firm review by audit committees
A Continuum of Alternatives - Considered the effect on the following factors when evaluating the continuum:
- Independence
- Transparency
- Audit quality
- Governance impact
- Work effort/cost
A Continuum of Alternatives - Consensus – Mandatory Comprehensive Review of the Auditor (5 year basis)
- Audit committee led
- Greatest focus on audit quality and demonstrated exercise of professional skepticism
- Greatest degree of public disclosure about the basis on which the audit committee evaluates, retains or replaces an auditor
- Annual auditor assessments will continue
- Audit Committee Working Group to provide details around the process
- Considerate of proportionality and scalability for reporting issuers
- Provide most of the benefits with fewer of the issues and less cost
Mandatory Comprehensive Review of the Auditor - The Working Group’s recommendation included:
- Consideration of what should be done in the annual compared to the comprehensive review
- Generating appropriate criteria, tools and guidance to assist the audit committees in completing the review
- Consideration of the scope of reporting issuers subject to the regime, as well as scalability
- Information from Regulatory inspection findings (which is currently not made public)
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