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Spotlight on audits

31 Dec 08

The Professional Oversight Board has published its first Audit Inspection Unit reports on individual firms

The Professional Oversight Board, part of the Financial Reporting Council (FRC), has published reports on Audit Inspection Unit (AIU) inspections for 2007/8 of seven audit firms.

They are: BDO Stoy Hayward, Deloitte & Touche, Ernst & Young, Grant Thornton UK, KPMG and KPMG Audit,

PKF (UK), and PricewaterhouseCoopers. These reports are available on the Professional Oversight Board (POB) website.

They cover reviews of firm-wide procedures and individual audits by the AIU between April 2007 and March 2008.

The audits reviewed related to financial years ending between June 2006 and August 2007.

These reports should be read in conjunction with 2007/8 Audit Quality Inspections: An Overview, which summarises key overall findings from the AIU’s inspection work and includes commentary on inspections by the AIU at smaller firms.

This report is also available on the POB website.

This is the first time that AIU reports on the findings of inspections of individual firms have been made publicly available. In addition, reports on individual audits reviewed by the AIU since January 2008 are being issued to the firms concerned, so that they can make them available to the directors of the relevant audit clients.

Both sets of reports are part of the FRC’s programme to support the continuous improvement of audit quality and mark an important milestone in the transparency of reporting on the work of the UK audit profession.

The FRC believes that these arrangements make the UK’s auditor oversight regime the most transparent in the world.

The public reports support the board’s view that the quality of auditing in the United Kingdom remains fundamentally sound with no systemic weaknesses.

However, they identify some important issues where improvements need to be made by audit firms.

The AIU inspection process is rigorous and challenging for firms, whose acceptance of the need to address its findings is key to the continued effectiveness of its work in safeguarding and enhancing audit quality.

Dame Barbara Mills, chair of the POB said: “The board considers that the AIU’s findings and the actions taken by audit firms in response to them have contributed significantly to an improvement in the overall quality of audit work in the UK.

“The profession should therefore be well placed to respond appropriately to more challenging times.”

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