PracticeAuditWatchdog condemned for maintaining audit quality ‘myth’

Watchdog condemned for maintaining audit quality 'myth'

Firms say the way the FRC's Audit Inspection Unit disclosed its yearly report is to blame for 'suggestions' that the mid-tier trailed the Big Four on audit quality

Tensions between mid-tier accounting firms and the FRC have been pushed to
breaking point after smaller firms accused the regulator of allowing the
impression to be created that mid-tier audits were inferior to those of the Big
Four.

The angry firms were upset with the way the FRC’s Audit Inspection Unit
disclosed its yearly report on audit quality to the public, even though they
supported the findings.

They said this was to blame for misunderstandings that had prompted
suggestions that the mid-tier trailed the Big Four on audit quality.

Jeremy Newman, managing partner at BDO Stoy Hayward, said he was frustrated
that the AIU had decided to report separately on the Big Four and other
significant firms.

‘I am disappointed that, by reporting separately on the “Big Four” firms and
the “Other Significant” firms, the AIU has enabled those that wish to perpetuate
the myth that there is a difference in the quality of audits carried out by the
firms in each of these groups,’ Newman said.

Steve Maslin, audit partner at Grant Thornton, said the way the report was
written meant it could be ‘interpreted in different ways’ and that confusions
had arisen after ‘mixed messages’ had emerged.

Nigel Tristem, head of audit at Baker Tilly, said that by grouping all the
mid-tier firms into one batch the FRC had ‘muddied the waters’. Reporting on
these firms as one group despite their differences created the impression that a
criticism of some was a criticism of all.

Paul George, director of the Professional Oversight Board, which oversees the
AIU, said all firms had been aware of how the AIU’s findings would be reported.

‘We held meetings with all the firms prior to publication and they were all
comfortable with how the report would be disclosed,’ George said.

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