FRC Hits Out At Big Four Firms Auditing Ethics

Thu, 16 Sep 2010

A City watchdog has warned that the Big Four accountancy firms must do more to improve their ethical performance.

A report by the Financial Reporting Council's (FRC) Professional Oversight Board accused KPMG, PricewaterhouseCoopers, Deloitte and Ernst and Young, of failing to exercise the necessary "professional scepticism" when making important audit judgements.

The FRC report stated that too many completed audits carried out by the market-leading quartet were in need of "significant improvement", with many including missed errors and potential conflicts of interest.

It said that the professional services firms need to fully embrace the principles underlying ethical standards, and added that they must accept that non-audit services should not be provided to audit clients where there are no "appropriate safeguards".

Dame Barbara Mills, chair of the Oversight Board, commented that the Big Four had shown a willingness to take action to improve their own auditing performance following the board’s 2009-10 audit inspections.

However, she said that the companies need to take further action to improve audit quality or protect auditor independence.

"We will review the actions taken by each firm and assess their effectiveness in future inspections," she added.
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