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Unfortunately, this is what happens when you get over worked and under qualified university graduates.
Surely the problems were more in the planning and less in the execution, the faults must lie further up the organisations (
I would for a start more look at those who share the profits and have a motive for quick/limited testing and saving time (and hence cost) in evaluating the risks at the planning stage?
Still, I can think of a good use for the money from the fines, set up a department that clamps down on small company Phoenix activities where all funds syphoned out and companies then struck off. (Missing director loans syndrome)
I cannot think of a single significant audit failure where the audit *partner* was unaware of the material issues and nevertheless made himself willfully blind to them. For example, Tescos, Enron, banks during the financial crisis.
I wish they would have a look at the last audit of Conviviality (LSE: CVR) which fooled everyone including the Telegraph's Questor column, Investors Chronicle, and the company's own directors.
The audit has become a tick box exercise to ensure you satisfy the monitoring unit. Also the reliance on planning fails to recognise the need to look at the results of tests and question what else needs to be done. The Law Society and Land Registry commenting on fraud and money laundering are not a tick box exercise but you need to look at it the round. There is a need to question and use common sense and not rely on a rigid process plus the need for experience.
The process needs to be reformed and simplified.
Unfortunately Common Sense went out of the window a long time ago, as is said the fines will not worry the big 4 as they will merely increase their prices and their clients will continue to pay up because they are the "BIG 4" and their name is on the Report.
The fundamental problem is that audit partners are heavily financially disincentivised from qualifying.And that has been a problem since audit began.
But yes, I agree that imposing additional tick boxes is a tokenistic gesture applied as successive sticking plasters onto each fresh failure, when the underlying model is wholly broken.
You cannot buy independence.
firmly believe that no company should be able to use the same audit company for more than 2 years running and then not for the next x years, surely that would remove the complacency and familiarity between the two
That is a really, really clever idea. You remove the financial disincentives from qualifying.
When you do a 5 why on this you get to (or I do) that accountancy training (for those in industry) and more importantly cpd, is to blame. If auditors were just auditors we wouldn't have this problem , it's because big 5 and others are salesmen , overcharging for stuff employed accountants within the business should already be competent to do.
So Big 5 are then motivated to give the board leeway in order to not upset the cart for their other super profitable activities.
This situation in industry is analogous to employed hospital consultants , hiring in medical doctors when asked to do anything more than take a pulse.
Anyone tell me what the audit is for? So much conflict of interest that means we're never really surprised when a company goes bust even when the audited statutory accounts show a wonderful picture.
Nothing more than a worthless, expensive box ticking exercise!!
I always thought it was to torment students in exams answering questions involving mealy mouthed platitudes about the role of auditors etc and having very little practical auditing (as actually performed) within the questions/ syllabus.
This article and many of the responses focus on the role of the Big 4 and their Client, mistaking the Board as the Client. The Auditor is engaged by the members and it is therefore that opinion that counts.
Until Shareholders become more active in the selection of Auditor, which may never happen, we add Carrillion to the list of "Accounting Scandals" and anticipate an increase in Fees for additional compliance work.