PracticeAuditKPMG proposes access to ongoing audit files

KPMG proposes access to ongoing audit files

KPMG's contribution to FRC consultation on choice in the audit market says that incoming auditors should be allowed access to files of their predecessors

Incoming auditors could be allowed access to files of their predecessors,
under radical plans being considered by the Financial Reporting Council as part
of its consultation on choice in the audit market.

The suggestion appears in the contribution of KPMG to the debate, which says
that the learning curve for a new auditor makes it difficult and expensive to
swap.

Key stakeholders are set to debate the idea when the FRC holds its next
meeting on 18 September.

The suggestion would have meant that KPMG could have seen Baker Tilly’s files
on Sanctuary when it took over the music company’s audit earlier this year in
controversial circumstances, though there is no suggestion the move is related.

The Big Four, BDO Stoy Hayward, Grant Thornton, the ICAEW and The Hundred
Group of Finance Directors all submitted responses to the consultation, with
ideas only now emerging after initial discussion of joint audits and even the
enforced break-up of the Big Four.

Access to predecessors’ files would not be entirely new, KPMG’s UK head of
audit Richard Bennison said.

Saving time would equal a saving of money, for both the firm and company,
KPMG argues.

‘Auditors are familiar with this in instances where an auditor resigns. It is
also done during mergers and acquisitions, as part of due diligence for the
auditor of the acquiring company.

‘Our suggestion is made so that the knowledge of incoming auditors is
improved, which would also decrease the cost of transition of one firm to
another, and we don’t need a legal framework to do that,’ said Bennison.

Other firms do not support the proposal, however. Grant Thornton said that,
while it recognises cost and time factors, it did not favour regulatory
intervention to compel file access.

‘This approach may need to be reviewed if a company had not appointed a new
auditor for several decades. The costs are rarely prohibitive,’ a spokesman
said.

Ernst & Young believes such changes to rotate audits, conduct joint
audits or increase information to successor auditors will have ‘limited impact’
on choice.

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