Watchdog slates firms’ super audit plans

Auditors can already conduct forensic investigations into companies if they
wish, but are not doing so, a leading investigator has said in response to the
industry’s calls for forensic audits.

‘If an auditor has the requisite degree of scepticism, then the process is
always open to them to ask a forensic accountant to look into the problem. I’ve
never seen that happen. The facility already exists to interrogate processes and
internal controls,’ said Chris Dickson, executive counsel at the Joint
Disciplinary Scheme, the watchdog for chartered accountants.

The Big Four, in conjunction with BDO Stoy Hayward and Grant Thornton, last
week called for a consideration of forensic audits, at a symposium in Paris,
involving detailed police-style investigations into companies to root out fraud,
as well as real-time reporting as opposed to the current static model.

The ideas have been met with scepticism by regulators, senior finance
directors and institutes, leaving the firms somewhat isolated.

Peter Wyman, of PricewaterhouseCoopers, has said that forensic audits might
be the only way to prevent large scale frauds. Such audits might cost as much as
£100m, according to some estimates.

The profession is now set to consult on some of the ideas in the document.

CBI company affairs spokesman Clive Edrupt said the body would discuss the
issues with the profession in the coming weeks.

‘The concepts they’ve presented are interesting, but we’re concerned with
issues of reliability and usefulness. We need to discuss questions such as
whether investors will be able to understand the information that they’re
bombarded with,’ said Edrupt.

Dickson said that, as far as real-time reporting was concerned, investors
were not interested in the frequency of accounts; rather, they were interested
in their quality.

‘There is a danger of figures being given out in this way. It could lead to
short-termism, which will have a direct effect on share price. And if the share
price drops, the company becomes liable to takeover,’ said Dickson.

He added that liability would not change. ‘Auditors may make fewer
representations but they will still be liable for what they audit,’ he said.

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