PracticeAudit‘Lightweight’ audit results due

'Lightweight' audit results due

Long-awaited test results for the independent professional review, the so-called lightweight audit, will be published on Monday further fuelling debate around what has become a controversial subject.

The ICAEW council has already refused to endorse the IPR, which was proposed and supported by the Department of Trade. Fierce argument has raged over whether it will help or hinder businesses and accountants ever since.

Designed by the Auditing Practices Board, which also designed the IPR model itself, the test involved volunteer firms running the IPR on a selection of their clients.

It is hoped the tests will help bring a conclusion to arguments over whether a light-touch form of assurance should replace the annual statutory audit for companies with a turnover between Pounds 1m and Pounds 4.8m.

The recently concluded company law review ended with a recommendation to introduce the IPR for companies already exempt and those that will be exempt if the government raises the threshold to the European maximum of Pounds 4.8m.

Much to the surprise of onlookers and many members, ICAEW council members moved to withdraw their support for the IPR earlier this year.

Stella Fearnley, a reader in accounting at Portsmouth Business School and instigator of the vote on whether to withdraw support for the IPR, wrote in Accountancy Age: ‘The IPR offers a lesser form of assurance than audit. This comes from analytical review of accounts and assurances from directors. Unlike audit, there is no independent verification of material items.’

Voluntary audits will continue, she points out, in response to market needs. Several of the UK’s leading banks have told Accountancy Age it is likely they will require an audit if companies are unknown to them.

Nevertheless many chartered accountants are greatly in favour of the IPR. Danielle Stewart of Warrener Stewart, in West London is an ardent advocate. She said: ‘There is one point on which everybody agrees – the IPR will not be adequate to spot a well-executed management fraud. But neither is the audit. The real problems in small companies are found just as well by the IPR as the audit.’

Whatever the outcome of the APB’s findings the ultimate decision lies with parliament.

The next stage for company law proposals will be publication of a government bill when it will be subject to parliamentary and further public scrutiny before ultimately leading to legislation.

Links

ICAEW u-turn over audit replacement

Banks will continue to demand audits

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