PwC offers conflicting views on IFRS

PWC HAS CLAIMED that international financial reporting standards “led to a system increasingly driven by rules and box ticking”, but was reluctant to repeat this before the House of Lords audit inquiry.

In its submission on the FRC’s discussion paper Auditor scepticism: Raising the bar, the firm warned the “increased complexity” of IFRS encouraged an overly compliance-focused approach.

The accusation came after similar concerns were expressed to the House of Lords select committee and cites the work of academic Stella Fearnley, who has warned of the box-ticking nature of the global standards.

When asked directly by Lord Forsyth whether IFRS “introduced a box-ticking culture”, PwC chairman Ian Powell declined to repeat his earlier opinion, saying instead that “there are some areas about IFRS that are good … and there are others that need review”.

He argued the application of IFRS has “a judgement element to it”, and dismissed as unfair the suggestion that the standards had led audit away from the judgement-based approach that most people would expect.

When asked to comment on the apparent discrepancy, PwC denied the box-ticking warning referred to IFRS, instead saying the criticism was levied at the increased need for compliance work to meet the review criteria.

It said the standards are “increasingly complex because transactions are more complex and end-users more demanding”, and claimed the issue of IFRS had little bearing on auditor scepticism, hence Powell’s reluctance to discuss it before the Lords.

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Fiona Westwood of Smith and Williamson.