PracticeAuditFRC bows to pressure over audit inspection unit

FRC bows to pressure over audit inspection unit

Regulator responds to pressure to disclose findings of audit inspections

The Professional Oversight Board, a part of the FRC, has opened a
consultation on the work of its audit inspection unit after pressure from
accounting firms to be more transparent about the unit’s work

The AIU, responsible for the direct monitoring of plc audits, does not
publish inspection reports on individual audit firms. This has prompted a number
of mid-tier firms to call for greater transparency from the AIU.

They claim that this disclosure will debunk any myths surrounding the
difference in quality between mid-tier and Big Four audits.

The current rules have been in place since 2003, but in a House of Lords
debate of the company law reform bill, a number of peers argued that full
publication of the AIU’s reports would provide valuable information to audit
committees.

The POB will now consult on disclosing the AIU’s reports, but chairman Sir
John Bourn said that the board still favoured the current approach.

‘We consider that giving audit firms the opportunity to correct weaknesses on
the basis of private reports, and only “naming and shaming” where the response
is inadequate, provides the strongest incentive for firms to take timely
action,’ Bourn said.

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