The duties of auditors and directors in the realm of corporate governance are inextricably intertwined.

Despite the recommendations of the Cadbury committee which were directed at clarification of responsibilities as between directors and auditors, there is continued uncertainty as to their exact relationship.Auditors play a central role in the Anglo-Saxon system of corporate governance by reporting on whether the accounts show a true and fair view of the state of affairs of the company at the end of the financial year, and its profit or loss for that year.

However, the primary responsibility for preparation of accounts and for financial stewardship lies with the directors.

Nevertheless, it is suggested that there is a point at which directors, particularly non-executive directors, are entitled to rely on the judgment, information and advice of the auditor and thus be protected from liability.Cadbury requires the report on directors' responsibilities to confirm that suitable accounting policies and accounting standards have been applied and to cover the responsibility of the directors for preventing and detecting fraud and other irregularities.The difficulty is that although these matters are the responsibility of the directors, it appears reasonable to seek the advice of the auditors on such issues.

The audit process itself is arguably an integral part of the mechanism put in place to discover and therefore prevent fraud.

For directors to rely on the audit alone would be negligent, but they are entitled to assign it some role within a wider system of controls.Judith Freedman.By June 1995 the Financial Reporting Council should have appointed a new committee to review how Cadbury has worked.

A key question will be whether Cadbury's very English basic approach was right.This approach was that compliance with a voluntary code, coupled with increased disclosure, would achieve the adoption of best practice more quickly and effectively than introducing a compulsory statutory code.

It was thought preferable to lay down a set of generally accepted principles, allowing some flexibility in their implementation, and to rely on shareholder pressure, informed by the media, to hasten widespread adoption of those principles.There was, however, a scarcely veiled threat that if this approach did not work, statutory regulati on would be inevitable.

But statutory measures could only impose minimum standards rather than best practice.Has the Cadbury approach worked? On a basic level, not too badly.

Only a small minority of FTSE 100 companies are failing to report full compliance with the Cadbury code.But Cadbury sought more than mere compliance with the code.

the hope was that corporate glasnost would improve standards generally, On this wider front, there are encouraging signs: witness the current swell of public pressure over length of service agreements and levels of executive pay and, even more, compensation for loss of office.There is clearly room for improvement, but Cadbury is much better than the average curate's egg even if it has not worked a miracle of black magic.And by comparison with corporate Europe in Germany, France and Italy, Britain does not show up too badly.Mark Sheldon.