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27 Sep 2010
Failings have been found in how auditors report and check on client assets held by investment institutions, according to the Financial Services Authority.
The authority wants to improve the quality and constituency of auditors' reports on client assets held by FSA-governed institutions.
The FSA's findings have been sent to the ICAEW and accounting disciplinary body the Accountancy & Actuarial Discipline Board (AADB).
It has launched the consultation having found what it describes as "material failings and weaknesses" in a number of audits.
These problems include: clean audit reports despite the investment business having committed breaches of client asset rules; auditors' reports covering the wrong chapters of the FSA's Client Assets Sourcebook (CASS); failure to provide a report because the auditors was unaware or did not understand the reporting requirements; failing to provide details of issues and problems they have found, reports submitted late and "simple errors" such as failing to sign the report or quoting the wrong FSA reference number.
Ten points of improvement have been outlined in the FSA's consultation, to improve the quality and consistency of their reporting plus stronger oversight of auditors' actions.
"It is ultimately a firm’s responsibility to ensure that they have adequate systems in place, but they, as we, rely on their auditors to provide the necessary assurance in this regard. Auditors charge a fee for this professional service – it is important that we and firms can rely on the reports they are signing off," said Richard Sutcliffe, FSA’s client assets sector leader.
Failure to improve will be punished with "more action", he added.
The Treasury outlined concerns over investment banks' audit arrangement around client assets, in December 2009.
MiFID regulation sets out that member states shall require investment firms to ensure that external auditors report at least annually on the adequacy of the investment firm’s arrangements for complying with the relevant requirements of MiFID in relation to its client money and assets.
The consultation closes on 31 December.
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Visitor comments Add your comment
Why doesn't the FSA slam the directors?
I half understand what the FSA are saying, however I also believe they are trying to blame auditors for their own failings. Surely the right thing to do would be to have FSA proceed with criminal charges and penalties for false accounting on the company directors. This would have a better effect. What i do not understand is how an external auditor can actually disagree with an independant qualified valuation of such an asset? Unless auditors are not seeking such qualification. Maybe the top 4 audit firms should loose their audit practising certificates?
Posted by: David Cook, 28 Sep 2010 | 00:00