EC's audit rules risk quantity over quality
Wednesday 7 December 2011 - by Andrew.Hickley@gfsnews.com
"If the current auditor is the best auditor, why shouldn't the company be allowed to keep them?" asks PwC's head of public policy and regulatory affairs, Pauline Wallace.
Combine this with a provision banning the consultancy staff from working on an audit, and PwC says it would no longer be able to rely on its separate actuarial, tax or valuations practices to contribute to the audit process. This, Wallace says, would inevitably result in a lower standard of audit.
She says the proposals are "clearly aimed at the big four" group of auditors - consisting of Deloitte, Ernst & Young, KPMG, and PwC - given that they only ban these activities for firms that make more than €1.5bn a year in audit-based revenues.
"When I look at the impact assessment I am struggling to understand what it is that they think is the problem here that they're trying to solve," she says. "I am actually seriously concerned that it will impact quality.
Wallace adds: "If you look at the AIU [Audit Inspection Unit of the Financial Reporting Council] reports on the firms, not this year but I think it was 2010 report, it explicitly said in that report that the quality of audit was higher when audit firms had in-house specialist expertise they could refer to rather than going externally to specialist expertise. None of us can afford to have specialist expertise that just sits around waiting to be used on an audit."
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