Australian Securities and Investments Commission: Auditors lack scepticism

AUDITORS MUST be more sceptical of management judgements and provide greater evidence to back up their conclusions, according to a new report by the Australian Securities and Investments Commission.

Among the Big Four, 17% of audits lacked sufficient evidence to support the opinions given, and the number rose to 31% in smaller firms, the Sydney Morning Herald reports.

The classification of loans as current (due within 12 months) or non-current is among the major problem areas; difficulties here recently led to a breach of company law by the directors of a debt-ridden shopping centre.

ASIC accounts and auditors team leader Doug Niven said that firms must develop a culture of professional scepticism, warning that auditors should challenge management conclusions ”rather than selectively seeking out evidence that will give you the answer that supports the judgement that has been reached”.

Going concern was another area highlighted by the regulator, indicating that some of the shortcomings it has highlighted might be applicable to firms in the UK.

Related reading