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November 14, 2008

Firms divided in the lead up to new audit inspection reports

By Nicholas Moody

The UK Financial Reporting Council’s high-level Audit Inspection Unit (AIU) reports on seven major UK firms are due to be released publicly for the first time this December and while one UK mid-tier leader has expressed fears they lead to greater economic uncertainty, others have welcome the move.

Grant Thornton UK chief executive Michael Cleary said any criticism of an accounting firm by the AIU needs to be considered in the context of good audit quality overall.

“At this critical point of time in the economic position of the country, the danger is that the AIU reports may be misinterpreted and there’s so much uncertainty that any criticism of auditors may be taken out of all context [due to the credit crunch],” Cleary warned.

Commentators have suggested that firm-specific reports would better serve the public interest and point to the US Public Company Accounting Oversight Board, which publishes select parts of its reports on individual audit firms.

RSM Bentley Jennison national managing partner Tony Stockdale warned if changes are delivered in a way that is negative, rather than a positive, it won’t have a beneficial effect.

PKF senior partner Ian Mills said that while he supported an increase in transparency, the reports “distort the playing field when you are comparing firms that are [inspected] with ones who aren’t [inspected] because regulation only affects the top tier of the profession”.

BDO Stoy Hayward managing partner Simon Michaels has welcomed the move.

“[The reports] allow audit committees to take more informed decisions about auditor appointments. It gives end users greater confidence and enhances the reputation of the profession more generally, he said.

Nicholas Moody

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