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Regulator aims to crack down on auditors

Regulator aims to crack down on auditors

The chief financial regulator, the FSA, wants new powers to censure, fine or even disqualify accountancy and audit firms.

A new report criticises auditors over their failure to scrutinise management adequately in the run up to the financial crisis. The report accuses auditors of showing a disturbing lack of scepticism.

The FSA says it now needs more powers of enforcement so it can deal with individual cases of regulatory concern.

Currently, officials from the FSA only meet auditors once a year but they now want to meet then several times to discuss any potential issues before year ends. The Association also wants to have direct access to listed companies’ audit committees so that they can discuss audit issues.

Michael Izza, the chief executive of ICAEW, said any reform of the audit profession needs to be based on evidence. He defended auditors, saying they had not failed and he flatly rejected that there had been a fundamental failure in auditing processes.

He stressed that last year’s Treasury select committee had determined that there was little evidence to show that auditors had failed in their duties towards limited company contractors.

Izza did agree that there were lessons to be learnt from the crisis and the accountancy profession was asking itself how to evolve the current audit model to meet the ever changing needs of the market. However, changes should focus on the actual situation, he said.

The head of audit at PwC UK, Richard Sexton, said that the FSA’s perception of an auditor’s responsibilities appears to differ from that of the auditing profession. Auditor’s view their role as one of making sure management has the right evidence to back up its assumptions, not to present them with alternative views.

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