There has been an extended debate in recent years about the appropriate period for the rotation of the audit engagement partner on listed company audits. In March 2009 the Auditing Practices Board (APB) issued a Consultation Paper which included a proposed change to ES 3 (Revised) 'Long association with the audit engagement' to allow audit committees to decide that this rotation period could be extended from five to seven years in certain circumstances.
The APB has this week issued a final version of ES 3 (Revised) that applies for periods commencing on or after 15 December 2009. In addition to revisions associated with the rotation period for audit engagement partners, changes have also been made to ES 3 (Revised) in respect of the rotation period for engagement quality control reviewers and further guidance has been included on factors affecting the significance of the threat to independence where other partners and senior staff are in senior positions for a long period of time.
The March 2009 consultation paper also included proposed changes to the APB Ethical Standards for Auditors (ESs) on a number of other topics including:
- remuneration and evaluation policies for key partners involved in the audit,
- the provision of non-audit services relating to securitisation and restructuring services, and
- the definition of an audited entity's 'affiliate'.
The APB concluded that it was desirable to make changes to ES 3 (Revised) at this stage as uncertainty on partner rotation periods needed to be removed so that audit firms and audit committees can take decisions on individual partner rotation questions.