Mid-tier charge as FRC transparency looms
Mid-tier firms celebrate a victory for transparency this week as the FRC opens a consultation that could see Big Four audits publicly slated
The prospect of greater disclosure of the FRC’s work on audit came as BDO
Stoy Hayward, the sixth largest firm in the UK by revenues, stepped up its
marketing challenge to the Big Four in a bid to maximise gains following
publication of the Oxera report on the audit market.
The Professional Oversight Board, an arm of the FRC, opened a consultation on
the work of its Audit Inspection Unit after pressure from accounting firms for
the unit to be more transparent. The move could see public reports on audit
firms similar to those produced by the Public Company Accounting Oversight Board
in the US.
The AIU currently does not publish its inspection reports on individual firms
or reveal the names of firms in its annual report. The rules have been in place
since 2003, but a number of peers in the House of Lords have since argued that
publication of the findings would be invaluable for audit committees.
Jeremy Newman, managing partner at BDO, said that the AIU would be able to
provide a clearer picture of audit quality by revealing the findings of its
investigations.
BDO’s head of brand and communications Mark Byatt said the firm was
‘investing heavily’ in its marketing in an attempt to create greater inroads
into the UK big ticket audit market.
Steve Maslin, head of audit at Grant Thornton, said the POB would do well to
follow the PCAOB’s example.
‘We accept that there has to be some element of private reporting or the
relationship between the AIU and firms would break down completely, but in the
US the PCAOB’s moves have shown that mid-tier audits are of the highest
standard,’ Maslin said.
The moves are likely to stop short of full publication of all reports,
however.
Sir John Bourn, head of the POB, said the board was keen to keep the
fundamentals of the current model in place. ‘Giving audit firms the opportunity
to correct weaknesses on the basis of private reports, and only “naming and
shaming” where the response is inadequate, provides the strongest incentive for
firms to take action,’ Bourn said.