KARACHI (May 20, 2011) – ACCA, in a policy paper Audit under fire: a review of the post-financial crisis inquiries, addresses the issues which have been raised during investigations by the UK House of Lords, the European Commission and the US senate.
In Singapore and elsewhere, regulators are also actively engaged in stakeholder consultations to assess how audit can be enhanced. The EC has promised legislative changes by the end of 2011.
Arif Masud Mirza, Head of ACCA Pakistan said: “Audit is under unprecedented scrutiny in the UK, Brussels and the US, following the global financial crisis. We have already had the European Commission promising that ‘the status quo is not an option’. In this paper we examine the various proposals put forward in the course of these inquiries and set out some recommendations for positive reform. Audit plays a vital role in the global economy by instilling trust in company reporting and we believe it needs to be enhanced for the greater benefit of investors and business.
“But it is essential that the changes made add value and are not motivated by the need to be seen as ‘doing something’. Any changes need to meet an appropriate public interest test. Some of the suggestions that have been mooted during the various inquiries, would be, we believe, ineffective and costly.”
Several recurring themes have emerged from the various inquiries including audit concentration, going concern issues, joint audits, mandatory audit rotation and the effect of International Financial Reporting Standards. ACCA is concerned that the political imperative for visible change may result in the wrong measures being adopted.
Arif Mirza concluded: “Policymakers and legislators have had every right to ask tough questions of auditors in the aftermath of the financial crisis. We believe enhancements to the role of audit can and should be made. But the changes which ultimately arrive as a result of all the inquiries need to bring real benefit and not be costly tinkering.”