Top Four Accountancy Firms fail to
meet Audit Quality Targets
The UK’s Financial Reporting Counsel has issued a Report stating that all of the UK’s top Auditors failed to hit quality targets for checking companies books.
None of the so-called top four – Ernest & Young, KPMG, Deloitte and PWC surpassed the 90% target of its audits being assessed as good quality, the Report said.
The Report gave individual statistics for performance under various headings for of the major accountancy firms. The Report said that it found cases in all seven firms where auditors failed to challenge management sufficiently. The Chief Executive of the FRC said that the audit quality results were not acceptable and he urged the firms to look at the Report and identify the causes of their failures and to take rapid and appropriate action to improve on the results.
This Report will increase pressure on the Accountancy profession from legislators and regulators to split the Audit and Consultancy arms of the top four Accountancy firms in particular.
The Competition Authority has also been looking at this issue and recommended mandatory joint audits where two firms split the work when checking a client’s books. It was also recommended that the audit department should be separated in part from the other sections of the Accountancy firm and have separate management, accounts, Chief Executive, Board and financial statements. The Chairman of the Competition and Markets Authority emphasised the effect of poor audits on people investing in businesses the subject of audit and reminded readers that the Report essentially says that in excess of a quarter of big company audits are considered substandard by the Regulator.
If you require any further detail or advice, please contact John Reid in O’Rourke Reid
Dial: +353 1 240 1200
Email: jreid@orourkereid.com
This document is for information purposes only and does not purport to represent legal advice.
© O’Rourke Reid 2019