Grant Thornton slips in biennial audit review

TWO OF GRANT THORNTON’S audits “require significant improvement”, according to Audit Inspection Unit’s most recent report, a significant decline from the last review when none fell into this category.

A spokesman agreed that “on a purely numerical basis, the figures don’t look positive”. Two of the ten audits examined were “good”, while six were “acceptable”, the same as in the last AIU report.

Professional scepticism was found to be lacking, especially in the areas of asset impairment and valuation and going concern.

The firm failed at times to fully challenge management’s explanations and key assumptions, and should consider whether more needs to be done to address recurring issues identified by the AIU, the report warned.

GT at times failed to obtain sufficient evidence to support audit conclusions, especially when valuing properties held at fair value, and in relation to budgeted cash-flows.

Half of the audits “required improvement” on work related to going concern, and six of the ten had “deficiencies” in their substantive analytical review procedures.

A lack of scepticism may also have been behind insufficient testing of journal entries. This was despite the fact that the audit team had found weaknesses in the controls over journals, meaning there was a heightened risk of misstatement.

Head of assurance Phil Crooks said recommendations from the most recent AIU review “have not had time to fully impact on audits [examined] for this report”, but insisted the firm has addressed many of the issues it identified.

The AIU said reporting to audit committees was generally “timely and of an acceptable standard”, as were finalisation procedures, although there were occasional breakdowns in communication.

It was pleased with improvements to GT’s internal monitoring of audit quality, with fewer reviews being carried out in greater depth. However, audit partner rotation remained of concern, and there were issues surrounding audits of multinational groups.

GT said it was “naturally disappointed” at the AIU’s negative findings, and pointed to its recent audit awards wins, concluding “we keep our audit procedures under constant review”.