PracticeAccounting FirmsInspectors raise concerns over Deloitte’s impairment testing

Inspectors raise concerns over Deloitte's impairment testing

A report by a division of the FRC has found that improvements should be made to the way audit reports are carried out by Deloitte

Inspectors found significant improvement was required in two of Deloitte’s
audits around the area of impairment testing.

The Audit Inspection Unit, part of the Financial Reporting Council, looked at
14 audit reports compiled by Deloitte and found two required significant
improvement, two were to an acceptable standard and ten were performed to a good
standard.

The AIU found an error in the goodwill testing model, with the implications
meaning an overstatement of the available financial “headroom”.

In another inspected audit, the Deloitte team gave “insufficient”
consideration to a major customer announcing a credit squeeze.

The AIU identified various areas for Deloitte to improve its auditing
services, including evaluation of controls over significant risks and
communicating with audit committees.

Vince Niblett, MD audit at Deloitte, said: “We are committed to retaining our
focus on audit quality and recognise that we are on a journey of continuous
improvement.”

He added the firm has implemented a number of actions in response to the
AIU’s report.

Other findings in the report include 26 non partners at Deloitte are
authorised to sign off audit reports in addition to the 184 UK audit partners.

The AIU estimates the firm has approximately 301 audit clients, including 21
FTSE 100 clients, and 60 FTSE 250 ones.

Further reading:

FRC
delivers verdict on audit firms

Inspectors
flag up KPMG stock-take audit concerns

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