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Biggest Audit Firms Hit by Scathing Regulator's Verdict
Numerous failings and shortcomings found by Audit Inspection Unit's (AIU) assessment of the world's six largest audit firms.
Helia Ebrahimi, Daily Telegraph, 26th July 2011

Biggest audit firms hit by scathing regulator's verdict
Not enough scepticism, a failure to robustly challenge management, and a propensity to encourage salesmanship of non-audit services. These are just three of the recurrent rebukes detailed in the Audit Inspection Unit's (AIU) assessment of the world's six largest audit firms.
The AIU's verdict comes as pressure grows to overhaul the industry which is already under the spotlight both in the UK and in Europe for lack of competition and issues around its ability to be independent.
Last week the AIU part of the Financial Reporting Council (FRC) attacked the industry as a whole for failing to meet accounting standards and lack of consistency across all firms, especially smaller ones.
Today, the regulator has published a series of scathing audits into the so called "Big Four" PwC, KPMG, Deloitte and Ernst & Young along with Grant Thornton and BDO on work they carried out between July 2009 and April 2010 .
Paul George, FRC director of auditing, said that despite some positives across the board, all six auditors have failed to ensure they adequately challenged management assumptions, or consistently demonstrated enough professional scepticism.
"Auditors have a gatekeeper role that shareholders have to believe in because they are first in line to be hit by losses," said Mr George.
All the auditors were guilty of failing to check financial statements and management assumptions with enough analysis and rigour, according to the AIU.
PwC the world's largest auditor was censured for a catalogue of failings like its rivals, most notably for problems with its assessment of goodwill at two FTSE 100 companies, weakness in the majority of its reviewed audits in relation to auditing of revenue, and issues with work led by an increasing number of audit directors rather than partners. PwC, was also criticised for its handling of international bank subsidiaries in the UK particularly on provisions made against loan books.
Richard Sexton, head of reputation, PwC said the bank had formulated a "detailed action plan" agreed with the AIU to address issues raised.
He also refuted suggestions PwC encouraged staff or managers hoping to become partners to sell non-audit work.
BDO was also strongly criticised for this.

Big Four International Auditors
General information about the "Big Four".

DTTL Appoints Former RBS Auditor as Chairman DTTL (Deloitte, Touche Tohmatsu Ltd) one of the 'Big Four' (consisting of DTTL, PWC, KPMG and Ernst and Young) of the world's top auditing firms, has appointed Steve Almond as chairman, despite his role as auditor of the Royal Bank of Scotland's accounts between 2005-2009, in the run up to and aftermath of the Bank's near collapse, which was only averted thanks to a massive bailout funded by the British taxpayer.

Related Articles Bank profits distorted by IFRS accounting rules - King
24 Jun 2011
Key points of the 'Big Four' report
30 Mar 2011
Accounting body hires 'architect' of controversial IFRS rules
02 Nov 2010

Biggest Audit Firms Hit by Scathing Regulator's Verdict
Biggest Audit Firms Hit by Scathing Regulator's Verdict

biggestauditfirmshitbyscathingregulatorsverdict.html

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