ACCOUNTING FIRMS around the world are producing audits that are deficient in a number of critical areas, according to a group of 30 international regulators.
The findings of the International Forum of Independent Audit Regulators (IFIAR), released last week from a survey conducted in 2013, indicated that audits were persistently deficient and that there "is a basis for ongoing concerns with audit quality".
Based on inspection reports issued during the members' most recent annual reporting periods that ended by July 2013, the survey found deficiencies in the auditing of fair value measurements; internal control testing; and procedures to assess the adequacy of financial statement presentation and disclosures.
The leading areas of deficiency in audits of systemically important financial institutions, including global systemically important banks, related to auditing of allowance for loan losses and loan impairments; internal control testing; and auditing of the valuation of investments and securities.
Audit firms' own quality control systems had the highest number of inspection findings in the areas of engagement performance; human resources; and independence and ethics requirements.
'Severity of deficiencies'
"The high rate and severity of inspection deficiencies in critical aspects of the audit, and at some of the world's largest and systemically important financial institutions, is a wake-up call to firms and regulators alike," said Lewis Ferguson, IFIAR chair and board member of the PCAOB.
The findings discussed in the survey are mainly from inspections of audit firms affiliated with the six largest international audit firm networks, BDO International, Deloitte Touche Tohmatsu, Ernst & Young Global, Grant Thornton International, KPMG International Cooperative, and PricewaterhouseCoopers International.
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