PracticeAuditPwC clients asked to reveal information on internal accounting judgments

PwC clients asked to reveal information on internal accounting judgments

Firms attempts to seize initiative amid attempts to reform audit industry

PwC-audited companies will be asked to publish more on their internal
accounting judgments, as the accounting giant seizes the initiative amid growing
attempts to reform the audit industry.

The firm, which audits 39% of the FTSE-100, will ask its clients to reveal
more information about sensitive internal accounting judgments – an ongoing
demand of investors who complained that auditors fail to convey valuable
information to the market.

PwC auditors will ask audit chairmen to reveal more detail about internal
accounting judgments on a voluntary basis. Andrew Ratcliffe, senior audit
partner with PwC, said he was unsure how the audit chairs would react, but hopes
to have more sensitive information in the public domain by February.

“We will ask what are the key judgments and assumptions that the auditor
discusses with the audit committee when he completed his audit,” he said.

“When I think of audit committee chairs I have known I can think of ones who
would think this is a great idea and others who would say ‘I’m not sure I want
to do this’.”

PwC also aims to convince companies to release information on significant
misstatement risks in a bid to better reveal the work auditors do behind the
scenes.

“For an intelligent reader of accounts, 90% of this won’t come as a
surprise,” he said.

“For the less informed reader, it prompts them to say ‘I should be looking at
this area of risk’,” he said.

The move was met with some support by investor groups who have long said
shareholders would benefit from better information on internal accounting
judgments.

“We very much welcome this and more transparency about accounting judgments,”
said Liz Murrall, corporate governance and reporting director with the
Investment Management Association.

The comments come as the European Commission prepares to release a green
paper on audit competition, due later this month, and the House of Lords prepa
res to hear evidence on the issue next week.

Lords
kick-off audit review tomorrow

Lording
it over audit

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