PracticeAuditICAEW hits back at FSA-FRC auditor criticisms

ICAEW hits back at FSA-FRC auditor criticisms

Profession defends role of auditors in lead-up to banking crisis, but accepts need for change

Izza defended the profession after it received heavy criticism from regulators , who are seeking greater power to inspect and reform audit.

He said the profession had not failed in their duties in the run-up to the financial crisis following the Financial Services Authority and Financial Reporting Council joint paper on enhancing auditors’ contribution to regulation which slated the profession.

The paper claimed auditors did not challenge their clients, accusing them of a willingness to gather and accept “evidence to support management’s assertions. “

He agreed the report posed “tough questions” for the audit profession-a number of which the institute raised with the Treasury select committee in January 2009, but he flatly rejected the idea of a fundamental failure in the audit process.

“Let us be clear,” Izza said. “The committee concluded last year that there was little evidence to suggest that auditors failed in their duties in the run up to the financial crisis.”

He did concede the profession was still learning the lessons from the crisis and is now asking itself how the current audit model needs to evolve to meet changing market needs.

But any amendments needed to be focused on the actual situation, not what people feared it was, he warned.

“Any response to this question must be evidence based,” Izza added.

Izza joined others from the Big Four who rallied to auditors’ defence, while also accepting the need for change.

Richard Sexton, PwC’s head of audit in the UK, said the profession had already taken the initiative, producing a discussion paper on the audit reform earlier this month.

However he warned against confusing an auditor’s responsibilities.

“When it comes to professional scepticism, the regulators’ perspective appear to be different to the auditing profession’s,” he said.

“We view our role as one of ensuring management has appropriate robust evidence to support its assumptions – It is not for us to present an alternative view and try to get management to accept it as better than theirs.”

Further reading:

Izza takes the gloves off in blog

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