ACCOUNTING WATCHDOG the FRC has told the profession's regulatory bodies to improve their audit monitoring but argued against restricting the role they play in audit regulation.
The recommendations come as part of a report by the FRC into its oversight of the profession's individual regulatory bodies such as institutes.
The report from the Professional Oversight Board (POB) was made to the Business Innovation and Skills department on its monitoring of the audit, accountancy and actuarial profession for the year to 31 March 2012.
"We have some concerns that the follow-up, where repeated visits suggest poor audit practice persists, is not always as effective as it should be, and intend to do further work in the coming year to see whether our concerns are justified," the report said.
Although the POB, which carried out monitoring visits to five of the six recognised supervisory bodies, said it would not take enforcement action against any institute that exhibited poor audit practices, it noted that the FRC, to which responsibility of auditor oversight will be delegated, will have the power to impose financial penalties on institutes that fail to meet their obligations.
The POB also threatened to name and shame individual bodies that have failed to respond to its recommendations promptly and where significant issues persist.
"This approach may also encourage the bodies to respond to our concerns in a more timely fashion," the report said.
However, the report warned against the European Commission's proposals to restrict the role professional bodies play in audit regulation.
"We do not think that the current proposals from the European Commission, which would require most day-to-day regulation of auditors to be carried out independently of the professional accountancy bodies, are necessary, well thought-out or would serve the public interest. The current arrangements in the UK allow the FRC to focus on matters of major public interest, while leaving the regulation of other matters to the professional bodies," said POB chair, John Kellas (pictured).
Another point made in the report said that the POB was now starting to work with the largest firms to develop contingency plans if one of them should find itself "in serious difficulty".
The POB also spoke to several large listed companies and found many are keen to have more than four audit firms to choose from. Some of the companies added that they were content to choose a mid-tier firm – however, they felt they could not select outside of the Big Four for reputational reasons.
"In recent years, we have reviewed and made recommendations to the recognised professional accountancy bodies on all significant aspects of their regulation of statutory auditors. This active programme of oversight has helped to maintain and improve the sharpness of the regulatory processes and has led to many specific improvements in the bodies' systems and practices of audit regulation," said Kellas.
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