Audit Inspection Unit reiterates call for auditors to be more sceptical in their work
Following its 2010/11 inspection of PricewaterhouseCoopers LLP, the Audit Inspection Unit (AIU) recommends that PwC should:
“Enhance the firm’s procedures to encourage further the exercise of professional scepticism and ensure that audit teams demonstrate this adequately in practice.”
Following its 2010/11 inspection of Deloitte LLP, the AIU recommends that Deloitte should pay particular attention to:
“The exercise of appropriate professional scepticism in assessing the assumptions and other bases used for the fair value measurement of assets and liabilities.”
Following its 2010/11 inspection of Ernst & Young LLP, the AIU recommends that Ernst & Young should:
“Ensure that sufficient professional scepticism is exercised by audit teams in connection with the identification of related parties and the audit of related party transactions.”
Following its 2010/11 inspection of KPMG LLP and KPMG Audit PLC, the AIU recommends that KPMG should:
“Ensure that audit teams apply appropriate professional scepticism to information prepared by the audited entityʹs staff that is significant to material amounts included in the financial statements (such as provisions or recognised revenue) and test its reliability.”
(Our emphasis added.) Something of a theme there on the need for scepticism.
The AIU’s criticisms of the Big Four accountants follow its annual review of the quality of large firm audits, which stressed that audit firms should ”ensure that both partners and staff exercise appropriate professional scepticism, particularly in respect of key areas of audit judgment such as the valuation of assets and the impairment of goodwill and other intangible assets”. We discuss the AIU’s annual review in this post.
We discuss the Financial Reporting Council’s ongoing work on encouraging auditors to apply an appropriate degree of scepticism in this post.
The AIU is part of the Professional Oversight Board, which in turn is part of the Financial Reporting Council.
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