Fresh perspectives on audit: the investors and analysts opinion
As the future of the current audit framework remains, investors and analysts clearly state that they value audit- but say they rarely read boilerplate audit opinions or bland audit committee reports.
In the wake of the financial crisis, investment professionals believe audit committee reports could become more helpful if the lid was lifted off the talks between auditors and audit committees, which currently take place behind closed doors.
Ideally, there should be greater transparency around these talks, but some cautioned this transparency should not jeopardise the frankness of discussions between auditor and audit committee.
Corporate governance specialists would welcome additional going concern information, rating the adequacy of current disclosure as poor. However, there is little appetite from mainstream investors for auditors to provide additional detail on going concern- they say enough information can be gleaned through management and other sources.
The findings came out of PwC’s Audit today and tomorrow study. As regulators weigh up what changes may need to be applied to the current system, the study directly seeks the investment community's views on the future of audit.
Investors and analysts called for auditors to provide assurance on performance measures ,
The majority of those surveyed also wanted auditors to report on companies’ preliminary results, which they say would provide more assurance at a critical stage in the reporting cycle of a business. The challenge for the profession to address is the fact that audit of financial statements may not be finished by the time prelims are issued.
In the wake of the financial crisis, investment professionals believe audit committee reports could become more helpful if the lid was lifted off the talks between auditors and audit committees, which currently take place behind closed doors.
Ideally, there should be greater transparency around these talks, but some cautioned this transparency should not jeopardise the frankness of discussions between auditor and audit committee.
Corporate governance specialists would welcome additional going concern information, rating the adequacy of current disclosure as poor. However, there is little appetite from mainstream investors for auditors to provide additional detail on going concern- they say enough information can be gleaned through management and other sources.
05 Jul 2011 08:32
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Ian Powell chairman and senior partner comments on EC proposals
On Wednesday 30 November, the European Commission published its proposals for audit market reform. Some of the plans have been met with opposition from business groups including the Confederation of British Industry, the Hundred Group of Finance Directors and the Institute of Directors.
Ian Powell, chairman and senior partner, PwC said:
Ian Powell, chairman and senior partner, PwC said:
“The European Commission’s proposals to reform the audit market are a missed opportunity to learn the lessons from the financial crisis, meet the needs of investors and help enhance audit quality across the European Union."
“In particular we support measures that will promote high quality audits and a dynamic and vibrant profession, and most importantly confidence in the financial information being reported to the markets¨
“We welcome plans to ease the mobility of auditors within the EU through the creation an ‘EU auditor passport’ ; a two way dialogue between auditors and financial services regulators.
We also support increased dialogue between the regulators and auditors.
“The Commission’s own consultation process has indicated a lack of support across Europe for proposals such as audit only firms and mandatory audit firm rotation. Furthermore the Commission has not provided any concrete evidence for any positive impact of these proposals on audit quality or properly assessed the additional cost burdens for business."06 Dec 2011 16:08
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Accounting plans put banking covenants under pressure for unis, charities and housing associations
Under current accounting rules, such organisations can adjust their accounts to recognise assets that have risen in value, but this will no longer be allowed under new rules being considered for not-for-profit organisations, known as Public Benefit Entities, (PBEs) and other private UK businesses.
The situation could see the organisations break their banking covenants - because the agreements are based on balance sheets showing the most up to-date value of those assets.
In future, such groups may only be allowed to hold those assets at cost as the Accounting Standards Board (ASB), the UK standard setter, works hard to make the rules governing unlisted UK companies more closely aligned to the international standards listed companies follow.
The ASB is preparing to release an exposure draft on a PBE standard, but the banking covenants issue remains on the table while the body seeks comment from businesses on its plans to harmonise UK accounting rules.
25 Feb 2011 11:10
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The effects of new accounting proposals could cause some housing associations, universities and charities to breach loan agreements with their banks, according to PwC.
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