Companies and their shareholders could lose the power to pick their auditors under radical proposals to boost audit independence being considered by the accountancy profession.
The Accountancy Foundation, the independent regulator established a year ago to oversee the profession, is considering whether to establish an independent appointments board that would select the auditors for Britain's publicly listed companies. That would follow the system already used in the public sector, where the Audit Commission appoints firms to hospitals, local authorities and other private bodies.
Under current rules, shareholders have to vote on the appointment and dismissal of auditors, but they are normally selected by the board.
The proposal is one of a series of measures being considered by the Government and the profession as ways of restoring confidence following the collapse of Enron.
Andersen, its auditors, gave the accounts of the energy trading firm a clean bill of health, although it subsequently emerged that billions of dollars of debt had been hived off into specially created companies and many of its trades were vastly inflated.
Andersen' is currently appearing in court in Houston charged with obstructing justice after hundreds of documents about the Enron audit were shredded.
The Accountancy Foundation's proposal has already been attacked by both shareholders and the profession. Michelle Edkins of Hermes said: 'An audit is not just about the firm coming in and looking at the books. There has to be a positive relationship between the auditor partner and the directors of the company he is working for.
'But we suggest that the audit committee needs to get more involved in the appointment of auditors. In practice, it is usually the finance director and the chief executive - and mostly the finance director - making the decision.'
