The FT has reported this morning that:
Big accounting firms have asked the UK industry regulator to pause quality inspections of their work for a year if they agree to audit high-risk companies listed on the London Stock Exchange.
The argument is, apparently, that auditors cannot be expected to get audits right in their first year of appointment. And, apparently, there are high risk companies where this is especially likely to be true. So they should be exempted from quality assurance standards in these cases.
The argument is bizarre for four reasons.
The first is that each audit is intended to be a report in isolation. An audit report is not issued as one of a series. It is issued on a particular set of accounts.
Second, if auditors cannot get the job right in the first year then they should not take the job. That is what professional ethics requires that they decide.
Third, this appeal suggest that the auditors in question are unaware of the option available to them of qualifying their opinion on companies presenting this type of risk. If that risk is real it should be reported, and nor be whitewashed by relaxing audit standards.
Finally, if these companies could not get auditors they would gave to either cease to trade or change their behaviour. Wouldn't that be advantageous?
Can't these auditors see that changed behaviour is what they are meant to deliver? Apparently not. And that is what is wrong with the profession.
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Incidentally, Richard, what do you think the auditors were doing in the Post Office sub-postmasters fraudulent convictions re the Horizon software ?
They would say it was immaterial
I would argue that there is a case for negligence
But I would sue the Post Office first. They had primary liability, and let’s be clear that they have admitted it
Now, now Richard, THAT is an easy question to answer: it’s because the auditors want the repeat business.
🙂
I haven’t got to Corporate Accounts yet, but I thought the jobs of Auditers was to state the facts as they exist at a point in time. It’s the job of laws and the company’s owners to change the behavior of the company. My local council hasn’t had its accounts audited for six years, it doesn’t seem to have changed their behavior.
No, it’s management’s job to state best opinion
It’s auditors job to say whether they can confirm they are reasonable
There are few facts in accounting