Chapter 4 Conclusion
The independence and objectivity of auditors is vital
for the efficient functioning
of UK corporate governance. It is essential for business
integrity, and shareholders
confidence. However, independence cannot be complete but
its role is relatively
important. The current rules are inadequate and
unsatisfactory to protect the
interest of shareholders, bankers and employees of
companies.
Moreover, a different problem remains wrongly
approached, which is the
requested independence of an external auditor. To
definite independence is an
uncertain task as long as its different faces are
unstable. Simultaneously, it is hard
to find an auditor remaining independent from the
company which he is auditing,
both protagonists have a business relationship and even
if the risk of reputation
and being investigated independence are constraints.
In recent collapses, criticisms argued that auditors
were not independent in their
work. Some criticism has called into question the
multidisciplinary and the
communication defect to other parties concerned in
the company functioning.
As far as the multidisciplinary aspect is
concerned, it is not bad in itself.
However, conflicts of interest need to be banned for
the auditors who audit and
give advice in the same time to the audit client.
First, firm rotation would be
seen to overcome these issues. Its benefit is that,
together with the commercial
pressure to retain this long-term relationship, it may
impede the independence of the
auditors at a minimum; it impacts the perception of
independence. Therefore, it can
be said that individual rotation of auditors is also
important. Normally, the same
auditor who sign the client account cannot stay
for a long period in the
company even if the firm of auditors does not
change as after some period
an auditor is a little bit linked as he have signed
already in the past, he will
get used some difficulties to another strategy
and becoming too close to
the audit client with whom he is involved.
On the other hand, self-regulation is an important
issue. The separation of audit
and advice is irresistible. Recently the recent
companies collapses, some
auditor firms sold their consultancy branches or operated a
distinctive separation.
However, the auditor alerts which facilitate a
co-ordination with people ( NEDs,
Lawyers, Bankers) who hold company information
need to be widened.
He may have a permanent contact with the banker and
other actors. After all,
if the auditor meets the investment banker only during the
alert procedure then that
may accelerate the collapse of the company as everyone
is aware of the problem.
On the other hand, if these meetings are
institutionalised, the question is irrelevant
and every possible meeting with the investment bankers
cannot launch a confidence
loss.
The auditors bring into the company an element of
transparency. However, questions
still remain about the self-regulating system. If the
relationship between the auditors
and the management cannot be avoided, how to establish
a perfect system of
corporate governance?
It may be said that there is not a single and perfect
system in modern economy.
As in some case, the collapse of a company is caused by
a series of factors which
may be external from the auditor's work. More
recently, some critics called
the German corporate governance as a model.
S. Suchan pointed for example that the fall of Enron has
been understood primarily
as a failure of the gatekeepers, which means the
intermediaries who provide
verification and certification services to the investors
(e.g. securities analysts and
especially the auditors); under German law the auditor is
not only considered to be a
gatekeeper, assuring the interest of the investing public (so
called « Kontrollfunktion»
or « Garantiefunktion») but also acts as
assistant for the supervisory board in its
184
internal control of the management. The auditors play an
important role in modern
companies. Moreover, they contributed in a decisive way
to the development of
welfare markets. The topic on their role is linked as on the
corporate governance and
for that reason will continue for some years.
184.Dr S.W. Suchan ,« Post-Enron and German corporate
governance», Cornell law School, 2004.
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