The willingness of auditors to exercise their judgement when applying international financial reporting standards could be severely damaged by European proposals to issue additional guidance on the new rules, the ICAEW has warned.

In a letter to the European Financial Reporting Advisory Group, the institute argued that the creation of an EU IFRS interpretations group could produce reams of additional guidance and result in auditors adopting ‘rigid and unresponsive’ practices.

EFRAG, which strongly influences EC decisions on accounting standards, recently proposed the creation of such an interpretations group alongside the International Accounting Standards Board’s own interpretations committee, IFRIC, as a way of ensuring IFRS is applied consistently in the EU.

But concerns have emerged that the existence of such a committee would remove judgement from the auditor’s role and turn the audit process into little more than a box-ticking exercise.

‘Companies and their auditors need to apply IFRS to unusual and complex transactions and to problems identified at a late stage through the exercise of professional judgement, without frequent requests to standard setters to elaborate additional rules and implementation guidance,’ said ICAEW chief executive Eric Anstee.

‘Good practice emerges over time, through discussions between auditor and client, between companies in the same sector and between and within audit firms and their technical groups. A rush by European regulators to issue formal interpretations of IFRS would stymie this evolutionary process,’ he added.

Deloitte has also expressed its opposition to the creation of a European interpretations group. Ingebert Hisdal, chairman of Deloitte’s IFRS strategy board, said even an urgent issues group, another suggestion from EFRAG, would not be welcome as ‘it would not be possible to apply due process to the urgent resolution of accounting matters’.