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14 September 2010

FRC published audit inspection reports for four largest firms

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The FRC looked at 15 audits and found that in three cases report was signed off too soon, but points out that the problem is 'profession-wide to some degree'.

The Professional Oversight Board, part of the Financial Reporting Council, has today published reports on the findings of the Audit Inspection Unit’s (AIU) inspections for 2009/10 of the four largest audit firms:
·         Deloitte LLP
·         Ernst & Young LLP
·         KPMG LLP and KPMG Audit PLC
·         PricewaterhouseCoopers LLP
Commenting on the reports, Dame Barbara Mills, Chair of the Oversight Board said:
“These reports provide important information for stakeholders and, in particular, audit committees when assessing the effectiveness of their external auditors. I am therefore pleased that we have been able to publish them some two to three months earlier than in previous years."
"The reports continue to show that individual firms and audit teams have generally responded positively to the AIU’s findings by taking actions intended to address them at a firm-wide level or on individual audits. However, they identify a number of important areas in which each firm needs to take further action to improve audit quality or safeguard auditor independence. We will review the actions taken by each firm and assess their effectiveness in future inspections.” ""
Key overall findings of the AIU’s inspections of the four largest firms
·         The firms have policies and procedures in place to support audit quality that are generally appropriate to their size and the nature of their client base.
·         Despite the quality of the firms’ policies and procedures, the number of audits assessed by the AIU as requiring significant improvement remains too high.
·         The findings suggest that the firms are not always applying:
           ·         Their procedures consistently on all aspects of individual audits;
           ·         Sufficient professional scepticism in relation to key audit judgments.
Firms need to embrace more fully the principles underlying the Ethical Standards and, in particular, accept that non-audit services should not be provided to audit clients where appropriate safeguards do not exist.


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