UK: key facts and trends in the accountancy profession

The Professional Oversight Board, part of the Financial Reporting Council, has published the tenth edition of its annual publication Key Facts and Trends in the Accountancy Profession: see here (pdf). This contains, amongst other things, data on large audit firms' income from audit and non-audit clients.

UK: POB publishes annual audit quality inspection report

The Professional Oversight Board, part of the Financial Reporting Council, has published its annual report on the audit quality inspections it undertook in 2011/12: see here (pdf). The POB states, amongst other things, that firms must take further action to embed the application of professional scepticism within the audit and that further improvements are required in the standard of auditing in the financial services sector.

UK: audit quality - the Audit Inspection Unit's report on firms auditing ten or fewer entities

The Professional Oversight Board - part of the Financial Reporting Council - has published the Audit Inspection Unit's report on its inspections for 2010/11 at firms auditing ten or fewer entities: see here (pdf). The AIU reviewed selected aspects of nine audits and found that they all required improvement. In respect of four of these audits, the AIU found that significant improvement was required. The AIU identified the quality of audits in respect of multi-national groups as a major concern. Indeed, possible disciplinary action may follow as a result of the AIU's investigations in respect of two of the audits requiring significant improvement. Other areas for improvement identified by the AIU included the going concern assessment and the standard of reporting to audit committees.

UK: key facts and trends in the accountancy profession

The Professional Oversight Board, part of the Financial Reporting Council, has published the ninth edition of Key Facts and Trends in the Accountancy Profession: see here (pdf). The reports notes, amongst other things, a continuing decline in the number of registered audit firms and a decline in the fee income received by audit firms for non-audit work provided to their audit clients.

UK: Audit Inspection Unit publishes reports for the Big Four

Earlier this year the Audit Inspection Unit Annual Report for 2009/10 was published (see here, pdf). This provided an overview of the recommendations made by the AIU in respect of the quality of auditing by firms. Today the AIU's reports in respect of four firms (Deloitte LLP, Ernst & Young LLP, KPMG LLP and KPMG Audit PLC and PricewaterhouseCoopers LLP), on which some of its recommendations were based, have been published: see here. All of these reports identify areas for improvement by the firms.

UK: POB annual report published

The Professional Oversight Board, part of the Financial Reporting Council, has published its annual report to the Secretary of State for Business, Innovation and Skills for the year to 31 March 2010: see here (pdf). This reports on the Board's responsibilities and activities and largely reproduces information already published. However, two items are worth noting.

First, the Board concludes that certain aspects of regulatory activity at some recognised bodies gives it "significant concerns". Second, with regard to audit choice, the Board notes that the majority of the Market Participants Group's recommendations have now been implemented but there is limited evidence that they have had a significant impact on market concentration and the risks thereby arising.

UK: key trends in the accountancy profession - POB report

The Professional Oversight Board, part of the Financial Reporting Council, has published the eighth edition of its Key Facts and Trends in the Accountancy Profession report: see here (pdf). The report notes, for example, that:

Over the past six years, the Big Four have experienced a steady increase in the proportion of fee income from non‐audit work for non‐audit clients. In contrast their fee income from non audit work to audit clients has been falling".

UK: Audit Inspection Unit reports published

The Professional Oversight Board, part of the Financial Reporting Council, has published inspection reports by the Audit Inspection Unit for 2008/9 in respect of Grant Thornton UK LLP (here); Horwath Clark Whitehill LLP (here); KPMG LLP and KPMG Audit PLC (here); and PricewaterhouseCoopers LLP (here). In general, the reports indicate that audit procedures were being performed to a good or acceptable standard in the audits surveyed. Nevertheless, in several of the audits reviewed the AIU identified the need for improvements in the obtaining and/or recording of audit evidence. 

UK: Professional Oversight Board report

The Professional Oversight Board (POB) has published its report to the Secretary of State for Business, Innovation and Skills for the year to 31 March 2009. The POB chairman, Dame Barbara Mills DBE QC, notes in her foreword:

Overall, our work in 2008/09 continues to support the view that the quality of auditing in the UK is fundamentally sound and that the firms have generally made good progress in implementing prior year recommendations. The economic downturn has given rise to increased challenges to auditors and we report on the emerging findings from this work in Section Five, though the full results and the public reports on each firm will be published towards the end of this year.

Our assessment of the actions taken by the major audit firms at a firm-wide level since late 2007 to respond to increasing turmoil in financial markets and the onset of the economic downturn is generally positive. However, we have noted variations in the extent to which audit procedures have been enhanced in practice, both between firms and between individual audit teams, though any issues are only likely to emerge from our 2009/10 inspection cycle".

UK: draft of the audit firm governance code published

The ICAEW's Audit Firm Governance Working Group has published a second consultation paper containing a draft of the Audit Firm Governance Code for auditors of public interest entities. The Code is being developed as a result of a recommendation by the Financial Reporting Council's Market Participants Group in the report Choice in the UK Audit Market. The Code has the following features (to quote directly from the consultation paper):

• It follows the transparency reporting definition of public interest entities as listed companies;
• It is targeted at shareholders in listed companies and contains principles related to their dialogue with audit firms;
• It contains a recommendation that the Code should not be implemented through regulation and that only firms that audit more than 20 listed companies should be expected to report on their application of the Code. Based on analysis published in 2009 by the UK Professional Oversight Board (POB) and reproduced in Appendix 4 [of the consultation paper], the Code will initially apply to eight firms;
• It is a cousin of the Combined Code, rather than its offspring. It follows the structure of principles and provisions, the philosophy of comply or explain, and the wording of the Combined Code in a limited number of areas. However, it recognises that a Combined Code designed for listed companies is of limited applicability to owner-managed firms;
• It recognises the qualities that audit firms are expected to demonstrate as regulated professional practices and summarises these qualities so that they can be more widely appreciated;
• It sets out a very specific role for independent non-executives of audit firms in addressing threats that the firms face in spite of their strengths as owner-managed and highly regulated professional practices. This includes being a ‘witness’ to how a firm is run, a ‘safeguard’ of a firm’s reputation especially in unregulated areas of its business, and a ‘channel’ for dialogue with stakeholders; and
• It envisages that firms will make Code-related disclosures in transparency reports.

For further information see: first consultation paper | responses to the first consultation paper | Financial Reporting Council audit choice project | 

UK: key trends in the accountancy profession - POB report

The Professional Oversight Board has published the seventh edition of its key facts and trends in the accounting profession report. Of particular interest are the data concerning auditing. The report notes:

The number of registered audit firms has been gradually declining. The overall number of audit firms registered in 2008 (8,179) is 25.7% lower than the number in 2003 (11,006). However, the rate of decline has been less in recent years. The number of registered audit firms fell by 4.6% in 2008.

Over the past five years, the Big Four have experienced a steady increase in the proportion of fee income from non audit work for non audit clients. In contrast their fee income from non audit work to audit clients has been falling.

... there has been a small increase in the proportion of listed companies audited by non Big Four firms".