The Government’s request to the FRC to develop guidance on audit committees has of course its root in the dramatic corporate failures in the United States in early 2002. These occurred despite the perception of close US regulation of accounting and auditing and despite the existence of corporate governance institutions including audit committees. The consequence has been falling confidence and rising confusion in capital markets not just in the US but around the world. The question was rightly asked: Could it happen here? And the answer has generally been, again rightly in our view: Yes; perhaps less likely than in the US, but it can be by no.
