The FRC had previously planned to make all companies with a premium listing on the London Stock Exchange subject to this new condition.
In a new consultation document published on Friday, the FRC said that applying the rule to all of these companies in the first instance would have created a risk of too many rushing to change auditor in the same year. In addition, the FRC said that the proposed change could be deferred for up to five years in some cases.
The dilution takes the FRC’s position even further away from that of the European Commission, which wants listed companies to be obliged to change their auditor every 6-12 years. The FRC said it hoped its low-key proposals would “help to alleviate the pressure for more prescriptive action at EU level”.
The role of auditors has come under scrutiny in the financial crisis, partly because of their failure to give warning of banking collapses. Some companies stick with the same audit firm for decades at a time, leading to allegations that they can build up too close a relationship, even though lead audit partners are regularly rotated.
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