Auditors are too ‘combative’ with companies, the
Group of Finance Directors has said.
The group said that regulation had led to overly ‘rules-based’ audits, and
that auditors lacked business understanding.
In a sharply worded response to a consultation on audit quality, the body
also said the failed disciplinary case against professionals associated with
collapsed bus group Mayflower had damaged the profession.
Responding to the consultation, Ken Lever, the Hundred Group’s financial
reporting committee chairman, said: ‘The growth in complexity of reporting is
leading to a greater reliance by audit firms on their technical departments that
apply “rules” to a set of facts without necessarily having a deep knowledge of
the circumstances or business context.
‘The profession is increasingly moving towards a more combative relationship
with companies which discourages co-operation which ultimately could have an
indirect impact on the quality of the audit.’
The response continued: ‘The spread of frivolous litigation claims and the
failure of the AIDB in the Mayflower case to provide a prima facie case are all
unhelpful to promoting confidence in the marketplace and in the audit firms
themselves,’ and added that the profession was ‘somewhat under siege’.
The criticisms of firms and the regulators are a rare intervention by the
influential group of FTSE FDs.
KPMG’s UK head of audit Richard Bennison said he did not know where the
Hundred Group’s comment stemmed from. ‘It might be from the strain on companies,
particularly the large ones doing IFRS conversions. ’ he said.
BDO managing partner Jeremy Newman said: ‘There needs to be a positive
relationship but you can’t do a good audit by beating each other up. Once upon a
time, you could answer questions. [Because of auditor independence rules] now
you have to tell the client that they have to work it out for themselves.’
FRC chief executive Paul Boyle said: ‘If the Hundred Group is arguing that
the relationship between the audited company and the firm should be cosy, then
that would be a mistake. No doubt in the last few years independence standards
have tightened somewhat. But if I were an investor, reading that comment, I
might think it’s a good thing.’
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