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Message: <blockquote data-quote="Jacob Miller" data-source="post: 73625" data-attributes="member: 5063">Background:As a bit of a corporate governance ('CG') nerd, I'm really interested by these latest proposed changes to the CG landscape.In order to fully understand the relevancy/ importance of this particular white paper, it's first necessary to understand a bit about how CG actually works in the UK. The following will be very brief, and highly simplified, so if you're already fairly familiar with the general CG landscape you'll probably want to skip on to the next section!The UK Corporate Governance Code ('UKCGC') as we know it is fairly new, with its origins in a series of reports into the state of corporate governance (mainly the Cadbury Report and the Hampel Report) through the 1990s. The UK CG model is not a legislative one. Instead, the UKCGC is primarily voluntary, with only a few provisions made enforceable by their inclusion in the UK Listing Rules on a 'comply or explain' basis whereby the company must either comply with the UKCGC or explain in their annual report why they have elected not to comply with it. This isn't particularly specific to auditing requirements, just a general backdrop.Auditing challenges within UK CG:On the topic of auditing specifically, this has been a hot-button issue since around 1990 and the seminal ruling in Caparo Industries Plc v Dickman ([1990] UKHL 2). Although primarily known as a tort/ duty of care case, the facts actually related to an auditing firm and whether they had a duty of care in relation to providing audit information to shareholders and prospective shareholders. Very briefly, in the case, claimants raised an action against an audit firm, alleging negligence in the audit process resulting in losing money in an investment. It was held by the House of Lords that no such duty existed and, while the main ramifications of this case were in changing the face of suing for damages in tort, the ramifications on the audit industry (although given little thought generally) were also massive. The case led really led to an erosion of a certain layer of responsibility for auditors, with firms (to an extent) taking it as cart blanche for questionable conduct and also being dragged heavily into conflicts of interest with the firms they were auditing. Although there were a set of 2005 Regulations in regards the management of conflicts of interest etc in auditing, arguably these were scant and ineffective.I'm going to slightly gloss over the elements of CG which contributed heavily to the 2007 financial crisis for expediency's sake (although these are vast and highly interesting, they don't relate so much to auditing specifically. I'd be happy to jot down a few brief thoughts on this if there's sufficient interest, though!) and flash forwards to more recent times, with some recent major insolvencies. Focussing particularly on Carillion's collapse in 2018, <a href="https://www.constructionnews.co.uk/contractors/carillion/carillion-auditor-watchdog-probe-finds-breaches-by-kpmg-21-09-2020/" target="_blank">KPMG were found to have committed several breaches of standards</a> in its audits immediately before the construction company's demise. KPMG declared that the Carillion was 'profitable and sustainable' in audits just a few months before the firm issued the first of its profit warnings. There were also major questions raised about auditing during the collapse of Thomas Cook and BHS, among others. It is still acknowledged that auditors are stuck in a major conflict of interest with clients, this effect is amplified even more where those same firms often carry out other business services work for the same clients, such as management consultancy - it appears that the white paper aims to tackle these in some new ways which haven't been considered to this point.Relevancy to firms: Now... the above is all well and good, but how does this actually relate to law firms? Well, there are a few considerations to make here. First and foremost, financial services/ regulatory advisory teams will need to get to grips with any changes in standards to be able to advise auditor clients. Any changes in this vein, though, will also affect transactional teams who need to fully understand the appropriate regulations when advising clients on the amount of weight they should put on any information, the obligations of of their clients in obtaining and compiling audit information in transactions (and, similarly, how much audit information given to their clients can be trusted) and, further still, how this impacts on the sort of warranties and indemnities, or other elements of sale contracts.Do you have any other thoughts on the new changes? [USER=5505]@Neville Birdi[/USER] [USER=1572]@Dheepa[/USER] I'm looking at you guys! <img src="data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7" class="smilie smilie--sprite smilie--sprite1" alt=":)" title="Smile    :)" loading="lazy" data-shortname=":)" /></blockquote>

Verification: Our company is called, "The Corporate ___ Academy". What is the missing word here?

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