Audit firms go on the defensive

Ernst & Young last week followed an earlier decision made by Deloitte & Touche in the UK to copy moves in the US restricting the provision of full internal audit outsourcing for listed external audit clients.

The firm said: ‘There is a public perception that there is a potential conflict of interest which makes carrying out a dual role of full outsourcing and external audit problematic.’

The move was seen as the latest attempt to shore up the integrity of the accounting profession in the wake of the Enron scandal, but the UK firm said it was adopting guidelines that were already due to come into force in the US in August this year.Rival Deloitte & Touche had already announced at the beginning of February it would no longer perform internal audit outsourcing for audit clients.

But Rodger Hughes, PwC’s UK audit chief, complained that the move would not properly address the underlying problem of independence.

He said: ‘My concern is that people seem to be rushing to make offerings in an attempt to placate concerns about independence rather than looking at the substance of what really causes independence problems.’

KPMG said it had discussed the situation with its clients, adding they had ‘expressed their complete satisfaction with the integrity of the work we do for them.’ Andersen said it was reviewing its policy.

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