The Financial Reporting Council’s Audit Inspection Unit (AIU) wants to publish many of its future reports, putting the profession under unparalleled levels of public scrutiny. As of 2008 a summary of every report conducted on individual firms will be made available to the public. At present AIU policy is not to publish any part of their reports on individual inspections. Rob Lewis reports.
The demand for greater transparency from the AIU and auditing in general has been building over the last 18 months, the FRC said. It had hoped to end consultation on the issue last year, but Freedom of Information amendments to the Companies Bill prompted a rethink. Consultation on the radical new approach is to begin this month, but is unlikely to alter things fundamentally.
“These are firm proposals for what we intend to do,” said Andrew Jones, director of the AIU. “We aren’t consulting whether we do it or not, just how we do it. I believe these changes put us well ahead of the US, and straight into the global vanguard.”
The new reporting strategy also allows firms who have received an individual audit review to pass them on to their clients. To ensure that clients know their audit has been reviewed, the AIU will list all the individual audit reviews carried out in its annual report. While there is no obligation for firms to share their AIU audit review, clients who fail to receive a copy will be free to draw their own conclusions.
Mid-tier firms have expressed hope that this transparent approach will help break-up the stranglehold the Big Four have on the audit market. “I happen to believe that the reports will shows that a number of firms outside the Big Four are capable of at least equal quality,” said the head of assurance at Grant Thornton, Steve Maslin.
In addition to the Big Four, the AIU will also review Baker Tilly and BDO Stoy Hayward, as well as Grant Thornton and Robson Rhodes, soon to merge.
