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September 21, 2010

Small firm audits not up to scratch

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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