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Reaching Key Financial Reporting Decisions: How Directors and Auditors Interact by Tony Hines, Vivien Beattie, Stella Fearnley

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7

Case 3 — Mallard plc

I think the dialogue between the audit committee and auditors is very important. All those things are good news. Do they bring about better quality? They do, actually … What the best companies have always done is now done everywhere (Jack, finance director)

7.1 BACKGROUND TO THE CASE

Mallard is a capital intensive company highly influenced by commodity prices. Turnover and operating profits have shown recent increases due to higher commodity prices and despite a decline in output. Reasons cited for the improvement focus on a higher proportion of fixed price sales contracts which insulated the company from fluctuations in market prices.

The finance director is Jack (aged in his 40s) who was appointed to Mallard a few years ago as he has wide financial experience and had previously been group finance director for another listed FTSE 250 company.

Paul (in his late 50s) is the audit committee chair. He joined the board of Mallard as a non-executive director some years ago. His past experience includes serving on the board of a major listed company (including a spell as chief executive) and he holds a number of other non-executive positions. He is a qualified accountant.

Gerald (in his 40s) is the current audit engagement partner. Another partner, Tom, based in another office, is also involved with the audit, liaising with the main finance function. Gerald has recently been rotated in as audit partner.

7.2 CORPORATE GOVERNANCE

In the company's corporate governance ...

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