UK inspectors have found a lack of auditor
scepticism and cases where auditors altered audit files after an
inspection request, according to an annual review of the nine
largest UK firms.
The Audit Inspection Unit (AIU) reviews the
quality of the statutory audits of listed and other major public
interest entities that fall within its scope, as determined each
year by the Professional Oversight Board. The inspections also
investigate policies and procedures supporting audit quality.
In its report, the AIU highlighted a number of
- Firms altering audit files after the date of
an AIU request, which happened on one occasion;
- A lack of sufficient audit evidence obtained
or recorded to support the judgments;
- A lack of confirmations to confirm the
existence of material assets and liabilities;
- A lack of a formal paper to support the
board’s assessment of going concern; and,
- Auditor’s reports being signed prior to the
completion of all necessary work;
The AIU also noted that audit firms had responded
well to challenges arising from the global financial crisis in
relation to the audit of going concern.
“While the number of good quality audits we have
seen has increased, I am disappointed that the number of audits
assessed as requiring significant improvement remains too high,”
the Professional Oversight Board chair Barbara Mills
“Firms must make more effort to ensure that the
improvements in their procedures are reflected in individual audit
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The report recommended auditors exercise
greater professional scepticism when reviewing management’s
judgments relating to fair values and the impairment of goodwill
and other intangibles relevant to the consideration of going
The watchdog also expressed concerns about one
firm’s growth strategy of selling non-audit services to audit