Complex audits of multi-national groups
undertaken by small audit firms are not up to scratch, according to
the UK audit watchdog.
A high proportion of small audit firms also
need to make significant improvements in obtaining sufficient audit
evidence in relation to material balances in the financial
statements.
The Audit Inspection Unit (AIU), the
inspection arm of the Financial Reporting Council (FRC), issued its
verdict following the inspections of firms that audit up to 10
public interest entities.
The AIU found audits of investment trusts and
similar entities undertaken by smaller firms were performed to an
acceptable standard.
Professional Oversight Board chair Barbara
Mills said smaller firms need to ensure they have the appropriate
resources and expertise before undertaking audits of listed and
major public interest entities.
The FRC has suggested specific competency
requirements for auditors of listed and major public interest
entities should be established.
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