Trials using the IPR at 20 accounting firms in the UK have shown that companies with a turnover up to £4.8m – expected to be announced as the new audit threshold – could save up to £2,400 a year, the equivalent of 61% of the previous year’s audit fee.
For smaller companies the savings were put at 27% of the previous year’s audit fee, or £1,100.
But, concerns remain over its effectiveness primarily due to the prohibition on corroboration. The IPR process is based on analytical review only, and not risk assessment.
The trials tested whether an IPR provided cost savings, how effective it was at identifying financial errors and whether directors, accountants and other third parties, such as banks, understand the level of assurance it offers.
Led by the UK’s Auditing Practices Board the research will help the government make its decision on whether to raise the audit threshold to the European maximum of £4.8m. An announcement is expected imminently.
Simon Wright of CareersinAudit.com discusses how an effective cyber defence force is critical to businesses worldwide and how internal auditors can make the transition to a new career in cyber security
The FRC has said that the investigation will 'consider, but not be restricted to, issues regarding misstated accounting balances'
Craig Maxwell joins the audit and assurance team in Scotland
Stephen Grayson to join the audit department in Manchester