U.K. regulators should not bar accounting firms from selling extra services to their listed company audit clients, but companies should do more to disclose what services they are buying, according to a paper from the Institute of Chartered Accountants of Scotland (ICAS).



The Auditing Practices Board (APB) launched a review of audit cross-selling last year after a Parliamentary committee on the financial crisis highlighted the extent to which accounting firms sold other services to their banking clients.



The review also followed press criticism of KPMG’s provision of internal audit services to its audit clients as part of an "integrated financial assurance" offer. The APB's parent body, the Financial Reporting Council, has since written to accounting firms warning them to think twice about the services they sell to audit clients while its review is continuing.



The ICAS paper says the APB should mandate better disclosure, rather than a ban on certain services. ICAS says that view is supported by a survey it conducted of audit committee chairs and finance directors of FTSE 350 companies, none of whom wanted a ban.



But ICAS does recommend that audit committees should have to pre-approve the purchase of any internal audit services or those provided on a contingency basis.



ICAS also says audit committees of listed companies should disclose “clear and detailed information about their policy on buying services from their auditor, how much they spend, and how independence is preserved.



Ian Paterson Brown, chair of the working group that produced the ICAS paper, said there was “no rationale or appetite for an outright ban” on auditors providing non-audit services.



If companies did more to explain their approach to buying services, “this would help to reduce the ‘perception gap’ which undoubtedly exists in relation to this issue,” he said.