Appleby and Revenue query work of auditors
Corporate watchdog Paul Appleby and the Revenue Commissioners have heaped further pressure on Ireland's auditors in the wake of the banking crisis by highlighting a range of concerns about their role and work.
Mr Appleby, who is investigating events at Anglo Irish Bank, said there were grounds for questioning "the consistency and quality of audit work within the profession''.
Meanwhile, the Revenue said that current audits said little about the business model of firms or their liquidity position.
Mr Appleby also said auditors "report surprisingly few types of company law offences to us", with the so-called "big four" auditing firms reporting the least often to his office, at just 5pc of all reports.
Mr Appleby said he had taken issue on "numerous occasions" with the quality of audit work and audit reports issued by accountants.
"Occasionally, this has resulted in admissions of lapses, and where appropriate, in revised audit reports being issued,'' Mr Appleby said.
A key review of audit work done at Anglo Irish Bank is due to be published within weeks by the Chartered Accountants regulatory board. This will look at the role of Ernst & Young, and its members could in a worse-case scenario face disciplinary proceedings.
A report on the banking crisis by Peter Nyberg is also looking at how auditors performed during the financial crisis.
However, change for the profession in Ireland is likely to come from further afield.
The EU is reviewing the entire auditing industry in the wake of the financial crisis and the EU Commission is currently pondering a series of far-reaching reforms. Among the most radical is that audit contracts would have to be rotated among firms every few years.
Mr Appleby and the Revenue have both made submissions in recent weeks to the EU review team.
The Revenue said recent events suggested audits should provide greater information, including the firm's business model and its liquidity.
"These should contain, for example, a full disclosure of all balance-sheet arrangements and of significant uncertain tax positions," it said.
"While Revenue is primarily concerned with the accuracy of historic profit measurement, such additional reporting would be helpful to Revenue."
It added that the dominance of a "big four" presented a "systemic risk'', meaning if one of these firms went bust it would cause significant ripple effects.
The Revenue also said it was important that audit reports be broadened out.
"Audit reports are primarily addressed to shareholders. However, as recent events have shown others, including the general public, have an interest in the results of some large companies, there is a need to better set out the societal role of the audit," it said.