UK body rejects contentious letters standard
Auditing Practices Board voices opposition to controversial auditing standard requiring directors to show commitment to internal controls
A contentious auditing standard requiring directors to exhibit their
commitment to internal controls through ‘management representation letters’ has
been rejected by the UK’s auditing body.
The Auditing Practices Board added
its voice to opposition to the standard in the UK – largely made up of top
company FDs and investors – in response to a global consultation.
Apart from adding more responsibility to directors – who already have
rigorous duties to fulfil outlined in the UK’s Companies Act – ISA 580 also
gives auditors the right to refuse to sign off an audit if such letters are not
produced.
The standard has been criticised by FDs, who feel auditors will rely on
management’s representation letters instead of conducting their own full and
thorough audit of the controls.
In its letter to the US-based International Audit and Assurance Standards
Board, the APB’s chairman Richard Fleck said: ‘ The terms of [the audit]
engagement should make clear the responsibilities set out in relevant laws and
regulations and, if necessary, establish such further responsibilities as are
necessary to enable the audit to be performed.’