Tougher audit rules poised to take effect

MEASURES requiring auditors to give early warnings to regulators about irregularities in the accounts of financial services clients are to come before Parliament within the next fortnight, writes John Murray.

The statutory instruments were scheduled for debate in the House of Commons last Monday but fell off the agenda because of the continuing refusal of the opposition to facilitate government business.

The measures were foreshadowed in the Criminal Justice Bill 1993, which contained a section on City fraud. A Treasury spokesman said that by putting forward the audit early warning requirement, the Government was implementing one of the recommendations of the Bingham inquiry into the collapse of the Bank of Credit and Commerce International.

Accountants will be under a statutory duty to report any suspicions they have about banks, building societies, insurance companies or any other financial institutions they are auditing. Previously they would only report irregularities if there was prima facie evidence of some wrong-doing.

The Labour Party supports the new rules, but they have attracted criticism from the accounting profession. Leading auditors have suggested they will be ineffective and could lead to rising audit fees.