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Friday, 5 July, 2002, 14:48 GMT 15:48 UK
UK strives to avoid Enron-style scandals
Patricia Hewitt
Hewitt could suggest rotation of auditing firms
Executive directors in the UK could be stripped of the power to appoint company auditors, in an effort to prevent accounting scandals.

Trade and Industry Secretary Patricia Hewitt said it was one of the measures that the government was considering.


It would be silly not to look at our system and see how we can continue to improve it

Patricia Hewitt
She said the string of accountancy scandals in the US - involving Enron, WorldCom and Xerox - had frightened investors and made people question the relationship between senior company executives and their auditors.

"It would be crazy to say it can't happen here," she told BBC Radio 4's Today programme.

Rotation of auditors

Ms Hewitt said the US scandals had shown a "much too cosy relationship between finance officers or chief executives and their auditors".

What we don't want in the UK is any disadvantage to UK companies

Sir Nigel Rudd
CBI

"There is clearly a case for the audit committee to appoint auditors on behalf of the shareholders," she said.

Other measures demanded of UK companies could include the rotation of auditing firms, she added.

"There are obvious attractions to the idea that you should rotate the auditors rather than potentially having an audit company serve the company for a very, very long time."

Unnecessary regulations

Later, at a conference in Cambridge, Ms Hewitt said action was needed to restore confidence.

"Confidence has been lost in the independence of auditors as a result of Enron.

"The relationship between the company and the auditor was blurred, to put the point kindly."

She said big auditing firms could also be barred from providing other, lucrative services to companies they are auditing.

The government was considering an overhaul of company law before the latest string of US scandals.

A review body will shortly be reporting its findings to Ms Hewitt.

"Of course we don't want to rush in with unnecessary regulations but it would be silly not to look at our system and see how we can continue to improve it," she said.

But the employers' organisation, the CBI, urged caution.

Sir Nigel Rudd, chairman of Pilkington and also chairman of the CBI's boardroom issues group, said: "What we don't want in the UK is any disadvantage to UK companies."


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