Brexit - Improve your controls

As global financial markets convulse in response to the stunning outcome of the U.K.'s referendum, now is the perfect timing to pose the right questions to the Investment Managers and Risk Officers of the funds under your mandate and start generating proof of your supervision activity.

It is also the time to follow up with your Business Developers and check either current clients are likely to postpone plans or they assess this event as an opportunity to start new projects. Enter and improve your controls.

In case you are responsible for a department, you must have had plenty of inputs (articles, conversations, …) from other experts and clients that may be also valuable for your colleagues. Enter and be the first to share this information proactively.

Find some points that could be shared:

- What has been the impact of this "Black Friday" in our funds in terms of NAV?

- Are our funds exposed to GBP? Are they hedged?

- Did Investment managers take measures during the day? What are the scenarios they are considering?

- Which is our exposure to British investors or clients?

Find an article that summaries what it was the morning after the Brexit.

Audit firm rotation. EU and US disagree.

In 2010, the European Commission released a public consultation, Green Paper on Audit Policy, and a year later the Public Company Accounting Oversight Board in the US also published a public consultation, Concept Release on Auditor Independence and Audit Firm Rotation, which both included questions about whether mandatory rotation of audit firms should be implemented or not. The main suggestion in both public consultations was that the rotation would enhance auditor independence and increase audit quality.

However, in 2013 the legislators in the US decided to prohibit a regulation on mandatory rotation of audit firms whereas the EU legislators, in 2014, decided to adopt the regulation to force public interest entities to change audit firms within a maximum period of ten years. These two different decisions by the EU legislators and the US legislators are interesting since they both wish to achieve the same purpose; to improve audit quality and auditor independence.

Still, they used two approaches that are contradictory to each other.

And you, as investor, would you support a mandatory audit firm rotation or not?


Source: Jönköping International Business School, Fredrik Jönsson & Johan Ottosson