Audit reports ‘no longer relevant’

Richard Fleck, chairman of the
Auditing Practices
, told a committee that, while annual financial statements are an
important source of information to investors, their relative importance has
probably declined during the past 20 years, ‘and will probably continue to
decline in the next 20’, he said.

‘The value of the auditor’s report cannot be higher than the financial
statements themselves,’ Fleck said.

The warnings of the value of audits, which are attracting increasing
criticism as snapshots that provide little assurance in fast-changing markets,
came as Fleck was speaking on a panel discussing issues relating to the
structure and finances of accounting firms.

The discussions were part of the
Treasury’s dialogue on
competition, choice and the future of the US auditing profession.

Fleck also told the panel, chaired by former
Securities and Exchange
chairman Arthur Levitt that auditors needed to ‘increase the
relevance of their work to the financial community’.

Fleck made the point in discussions around the long-term sustainability of
the profession. ‘The quality of the staff available to audit firms can only be
maintained, or enhanced, if auditors increase the relevance of their work to the
financial community,’ he said.

There were also calls for firms to be more transparent about their
governance. But Fleck said: ‘There is a danger that audit firms will not respond
to the challenge and these reports will just contain “boiler-plate” language’.

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