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Auditors’ key task is to determine whether a set of accounts gives a “true and fair” picture of a company’s business. They acknowledge they have to carry out what tests they can to determine whether the figures present that true and fair view. Documentary trails for all transactions to support the numbers in the accounts need to be followed. Invoices need to tally with what has been put in the books. The veracity of documents has to be investigated.
Auditors should also put in place procedures and processes that are designed to minimise the chances of fraud slipping through the net — such as checking that stock and assets really exist, and verifying cash balances and borrowings with companies’ bankers.
Last week, in response to concern over such conflicts of interests, two of the “Big Four” accounting firms, PwC and EY, said they would stop providing non-essential consulting services to their UK audit clients in the FTSE 350 index by 2020. KPMG took a similar decision last year, while Deloitte, though it has not yet formally adopted the policy, says it supports it.
Full article on Financial Times (subscription required)