Audit quality fight turns nasty

GONE are the days when company bosses could dismiss their non-executive directors, as the maverick British businessman Tiny Rowland did in the 1980s, as mere “baubles on a Christmas tree”. Multiple rounds of corporate governance reforms later, independent board members are not just decorative, but in fact a critical pillar of our trust in public markets.

The heads of US audit firms, which have a role just as crucial to the integrity of capital markets by verifying company accounts, are apparently more sceptical about formalising external oversight in regulation.

A new rule agreed by the US audit regulator, the Public Company Accounting Oversight Board (PCAOB), will force each of the biggest firms to establish a body to oversee quality control, and to make sure at least one person on it comes from outside the firm.