BIS officials asked to license small accounting firms

The Department of Business will be asked to restrict small accounting firms
from auditing complex companies, a senior regulator has said.

Paul George, director of the Professional Oversight Board, which sits within
the Financial Reporting Council, said he will talk to the Department of Business
(BIS) following the publication of a scathing report which found audits of
multinational groups, undertaken by small accounting firms, “required
significant improvements in most cases”.

Only three of the eleven audits inspected required no improvement. The report
recommended “competency requirements” for auditors of listed and major companies
to reduce the incidence of poor quality work.

George said he would be talking to government officials about the
recommendations.

“What we think is there should be additional licensing requirements or
competency requirements for audit and therefore that enables an additional
control for the risk when firms are taking on audits that they do not need to
do,” he said.

“The first step is to try and stimulate a debate on the topic and we will be
talking to other stakeholders including those that could ensure a change took
place, i.e BIS.”

He said audit failings were particularly high when firms inspected
multinational firms, with bases in obscure countries.

He was also concerned accountants were helping to prepare financial
statements, then going on to audit them.

“The other particular challenge is where a company itself has limited in
house financial expertise, so the auditor gets encouraged to provide more
assistance in the preparation of financial statements,” he said.

Further Reading:

Watchdog
reveals scathing report of smaller audit firms

Audit
Inspection Report on Smaller Firms Published