PracticeAuditInvestors attack ‘rules-based’ ISAs

Investors attack 'rules-based' ISAs

Risk that US standards are creeping into the UK is biggest concern.

Having settled their differences with auditors over proportionate liability, investors have turned their attention to the potential damage that international standards on auditing could cause.

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Investor groups have expressed concern over what they see as ‘rules-driven standards’ based around the ‘US model of accounting and audit’. ISAs, which came into force in December last year, could also pose a threat to the work of the Audit Quality Forum.

‘Creep from these standards into the UK has been one of the major causes of the growing number of complaints, about an increasingly formulaic approach being seen on audit,’ said one major investor.

The standards, devised by the International Federation of Accountants and adopted in the UK by the Auditing Practices Board, are designed to provide a common set of global standards.

But stakeholders are concerned that the approach could result in the statutory audit becoming little more than a compliance task, rendering the work undertaken by the AQF to improve the service auditors provide to shareholders practically irrelevant.

Investors at a recent AQF meeting have already broached the issue and, although auditors acknowledged the concerns expressed, the matter has yet to be taken further. Investors may also find that auditors are less sympathetic on this issue, with many bodies having already welcomed ISAs

‘We are always seeking to get right the balance between principles and detailed rules, and I believe the balance is right at the moment,’ said Martyn Jones, Deloitte partner and vice-chairman of the ICAEW’s technical and practical auditing committee.

‘But we have to make sure that auditors are allowed to think and don’t just become box-tickers.’

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