Audit - One in five fails quality test
Auditors cut the number of serious mistakes in their compliance work last year, but failed to reduce the number of complaints by clients, a report by the three chartered institutes has found.
The annual report on audit regulation, which is produced for the Department of Trade and Industry as part of the regulation of the profession, reveals that 20% of firms visited by inspectors gave rise to serious concerns about their audit performance compared to 29% in 1996. Complaints against auditors rose slightly from 175 to 177.
But the decline in serious mistakes is unlikely to impress ministers, who are deliberating over whether to accept proposals for self-regulation to continue in the form of a Review Board, put forward by English ICA president Chris Swinson. They will be concerned that a fifth of auditors fail to meet basic professional standards.
Malcolm Hoskins, head of the joint audit committee for the three institutes, said the complaints remained a small number in comparison to the 8,931 firms of auditors registered with the institutes.
He added the majority of firms accused of making mistakes by inspectors from the Joint Monitoring Unit made only one mistake.
The report reveals a sharp drop in the number of smaller firms in the English and Scottish institutes that have registered for audit work – cuts of 5% and 7.5% respectively.
Hoskins said he expected many firms had dropped out after the threshold for company audits was raised from #90,000 to #350,000.
The costs of regulation at the English ICA are also set to soar. Budget estimates for this year show a 22% rise in costs since 1996 with only a 7% rise in fee income to compensate.