AUDITORS have rejected the suggestion that their work requires more scepticism.
Following the release of a discussion paper from regulators on whether auditor scepticism needs to be increased, firms defended their attitude and working processes to provide audits.
Some noted that the application of international financial reporting standards (IFRS), which can provide a range of potential outcomes, is confused by regulators as a lack of scepticism.
Baker Tilly said that the paper suggests a "presumptive doubt", which is beyond the new clarified auditing standards and therefore "wholly inappropriate".
"In our opinion, if auditors were expected to plan their audits on the basis on the basis of 'presumptive doubt' this would greatly increase the work needed to issue an opinon because auditors have to plan their audits assuming that all the evidence they have been provided with at best was wrong or at worst was a lie," said Baker Tilly technical director Hugh Morgan.
Deloitte said in its letter:" This change would significantly increase business costs and runs contrary to a risk-based approach."
Firms also noted that illustrating sufficient skepticism when cold files were reviewed was very difficult.
Ernst & Young said: "Scepticism is more of a behavioural trait, and given this inherent quality it is difficult to demonstrate fully via documentation or indeed to measure objectively...It is an inseparable component of audit quality and we believe it is audit quality that must be appraised, promoted and rewarded, rather than its constituent parts."
Richard Fleck, chairman of the APB, and a director of the FRC, said: "The APB intends to undertake further work in this area to ensure there is a consistent understanding of its nature and role, increased transparency of its application and appropriate consideration of the financial statement presentation of matters subject to significant challenge by auditors."
More to follow.
The reason why auditors are being asked to be more sceptical about finances? No doubt the huge cost of the collapse of the banks that auditors had certified as OK.
But the lack of a united front on for example the various aspects of regulatory capture nationally, let alone internationally, surely doesn't help the profession.
Posted by: slightly optimistic, 10 Mar 2011 | 16:43
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