Pattern of poor performance at some auditors
Accounting regulator will not name the firms where it found repeated poor performance, writes Sarah McCabe
Published 17/01/2016 | 02:30
A number of accounting firms have failed to clean up their acts - even after previously being handed down reprimands for poor audits.
Accounting industry regulator the Chartered Accountants Regulatory Board (CARB) has said it spotted a pattern of repeat poor performances by some firms in their statutory audits of clients.
The pattern was spotted as part of CARB's regular inspections of audits carried out by Irish accounting firms of all sizes, the results of which are passed on to its Quality Assurance Committee.
CARB carries out these inspections in order to ensure that auditors are complying with their legal obligations.
"At a recent meeting, the Quality Assurance Committee (the 'QAC') was disappointed to receive a number of 'D' graded audit inspection reports for firms where there is a history of poor performance on monitoring inspections, i.e. consecutive 'D' reports," the regulator said in a recent regulatory bulletin.
"The QAC was therefore concerned that the remedial actions taken by those firms after the previous monitoring inspection did not result in sustained improvements in the standard of audit work.
"In addition, the QAC was disappointed to note that, for a number of firms in the 'D' category, the standard of audit work had deteriorated since the previous monitoring inspection, which had been graded 'B' or 'C'."
Firms can receive 'D' grades for a variety of reasons, from failing to maintain adequate documentation to more serious infractions that could merit the loss of their licence to carry out audits.
The regulator refused to name the firms who had received consecutively poor marks for the performance of audits.
The Irish Auditing and Accounting Supervisory Authority, which supervises CARB, said it was not obliged to do so under EU law.
CARB inspects accounting firms for audit performance on a rolling basis - every two years for bigger firms who hold audit contracts for bigger companies and up to every six years for smaller firms which perform low-risk audits.
The firms whose inspections revealed repeated under-performance are small firms, it is understood. CARB's annual report shows that some 32pc of the audit inspections it carried out in 2014 detected auditing of a standard below what was expected.
In 25 cases, the standard of work was so poor that the CARB's Quality Assurance Committee deemed the firms should not be permitted to carry out statutory audits at all. Twenty-four of these firms voluntarily surrendered their audit licenses. In other cases, action plans were put in place to improve performance.
Some of the rules governing audit inspections are changing. From June 2016, responsibility for the inspection of public interest entity audits such as those of banks and building societies transfers from CARB to its supervisor IAASA. This means that in future, scrutiny of the Big Four will be undertaken by IAASA.
Sunday Indo Business