RegulationAccounting StandardsOil major’s FD slates firms over IFRS

Oil major's FD slates firms over IFRS

E&Y and other major firms accused of failing to provide adequate levels of support during IFRS conversion by Cairn Energy's finance chief

A senior finance director has slated audit firms for their inadequate support
during the IFRS transition, in a rare public criticism of the big firms by an
FD.

Jann Brown, Cairn Energy’s finance chief, slated the company’s auditors Ernst
& Young and other major firms for failing to provide adequate levels of
support during IFRS conversion, in an interview published in Accountancy
Age
today.

‘We did not get the support we were looking for through the IFRS transition –
but I have yet to speak to a company who felt that they were fully supported by
their auditors,’ said Brown.

‘I recently chaired a session at an FDs’ strategy conference about IFRS and I
don’t think there was anybody there who thought it was a good thing in the way
that it’s gone – however, it’s here to stay and we all recognise that we have
got to live with it,’ she added.

Cairn suffered huge volatility on its profit and loss account following the
changes, relating to oil wells that were not immediately successful.

The audit firms enjoyed a fee bonanza as large companies adapted their
reporting to the new standards. The Big Four grew revenues by between 10% and
20% as IFRS, alongside the impact of Sarbanes-Oxley in the US, boosted audit and
advisory revenues.

The Big Four have paid out huge sums to partners on the back of the fee
bonanza, which in the case of BP saw the oil major pay out £136m in 2005/06 for
Sarbox, IFRS and other services.

The comments will put the big firms on notice that they will need to do
better as future regulatory changes are implemented. The firms are all now
helping AIM companies to effect the transfer to IFRS, which kicks in this year.

Sources at the Big Four said that IFRS ‘was a difficult process for many
companies’, though E&Y itself offered no official comment, citing client
confidentiality.

Neither PwC nor Deloitte were able to comment as Accountancy Age
went to press. A spokesman for KPMG said on the general issue: ‘IFRS has been a
big learning curve for auditors, companies and investors.’

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