I can’t help thinking that the audit inspection process here is a little second rate.
I’m certainly not questioning the experience and professionalism of the staff, or the quality of the work they do – it really just comes down to resources. The Public Company Accounting Oversight Board (PCAOB), the US equivalent of the Financial Reporting Council, has seen its enforcement and investigations budget rise from $8.5m (£5.4m) in 2008, to $12.1 (£7.8m) in 2009 and again to $15m (£9.6m).
The Financial Reporting Council’s professional Oversight Board, which runs the audit inspections, had its budget drop to £1.3m in 2009 from £1.5m in 2008.
The inspection teams select 15 audits, picked according to their risk factors, from each large audit firm. After they make their recommendations in their reports they return to only about 1-2 audits, from the previous year, to make sure measures they have recommended have been implemented.
It just seems to me they are working with a vastly reduced budget not only compared to the US system, but also compared to the audit firms they are inspecting. What’s more tales of audit firms changing documents before delivering them to the inspectors, gives us pause for thought about the odds our audit inspectors seem to be up against and the effectiveness of the entire system.
If the Audit Inspection Unit can complete such a high level of work with their meagre budget, imagine what they could accomplish with a budget which better reflects the importance of the work they do.