Post‐Enron developments in UK audit and corporate governance regulation
| Date | 01 December 2003 |
| Published date | 01 December 2003 |
| Pages | 309-322 |
| DOI | https://doi.org/10.1108/13581980310810598 |
| Author | Ian P. Dewing |
| Subject Matter | Accounting & finance |
Post-Enron developments in UK audit and
corporate governance regulation
Ian P. Dewing and Peter O. Russell
Received (in revised form): 17th June, 2003
Centre for Competition and Regulation, School of Management, University of East Anglia, Norwich
NR4 7TJ, UK; tel: +44 (0)1603 593 336; fax: +44 (0)1603 593 343; e-mail: I.Dewing@uea.ac.uk
Ian P. Dewing and Peter O. Russell are
faculty members of the accounting group
at the School of Management, University
of East Anglia (UEA), Norwich, UK, and
are also members of UEA’s Centre for
Competition and Regulation.
ABSTRACT
KEYWORDS: auditing, corporate govern-
ance, Accountancy Foundation, Enron,
Higgs Report, Smith Report
This paper examines post-Enron developments
in UK audit and corporate governance regula-
tion. It considers the latest government-initiated
reviews into audit regulation, specifically those
conducted by the Co-ordinating Group on
Audit and Accounting Issues and the DTI
Review Team, and into corporate governance,
specifically those undertaken by Derek Higgs
and Sir Robert Smith. The paper notes that
the reviews were undertaken in the context of
developments initiated both before and after the
collapse of Enron, including, respectively, the
new system for the regulation of the UK
accountancy profession as established by the
Accountancy Foundation, and the US Sar-
banes-Oxley Act. The reviews have been wel-
comed by government and thus should play a
large part in setting the agenda for the future
regulation of UK audit and corporate govern-
ance. The proposals for auditing share a
number of characteristics with the recommenda-
tions of a pre-Enron empirical study which
investigated the regulation of UK listed com-
pany audit, although significant distinctions
remain. The proposals for corporate governance
continue the ‘comply or explain’ approach and
do not recommend passing its regulation from
the Financial Reporting Council to another
independent body of ‘stature’ such as the Finan-
cial Services Authority (FSA). It is concluded
that key to successful implementation of recent
proposals will be the need, for audit, to demon-
strate that there is no cosy relationship between
regulators and the auditing profession, espe-
cially the ‘Big Four’ firms, and, for corporate
governance, a willingness to look outside the
‘one-size-fits-all’ approach.
Following the collapse of Enron, the gov-
ernment initiated a series of reviews, pri-
marily under the auspices of the
Department of Trade and Industry (DTI)
to examine whether changes were neces-
sary to regimes for the regulation of UK
audit and corporate governance.
1
The
House of Commons Treasury Committee
also undertook its own inquiry to which
the government responded.
2
The reviews
were undertaken in the context of develop-
ments initiated before the collapse of
Enron, most notably the Company Law
Review,
3
the new system of regulation of
the accountancy profession,
4
which came
into full operation in January 2002, and the
role of the Financial Services Authority
(FSA) as the UK Listing Authority
Page 309
Journal of Financial Regulation and Compliance Volume 11 Number 4
Journal of Financial Regulation
and Compliance, Vol. 11, No. 4,
2003, pp. 309–322
#Henry Stewart Publications,
1358–1988
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