At ACRA’s annual Public Accountants Conference on Aug 19, 2009, ACRA presented their findings on public accountants as follows:-
On the larger audit firms ie. auditors of public interest companies lack ‘professional scepticism’ while experienced audit partners often take a hands-off approach on actual audit (Edgar’s cheeky remark – Partners take a hands-on approach on golf?)
What do you mean by “lack of professional scepticism”? ACRA noted the following:-
- the larger audit firms have generally failed to assess related-party transactions, management assumptions and forecasts, and the risk of fraud or misstatements.
- junior audit staff doing most of the key audit work.
As to the smaller accounting outfits, they struggle to maintain audit quality with a very very competitive fees environment. Some faults noted are:-
- some small outfits still do not search for unrecorded liabilities and do not perform work to test foreign currency translation.
- increasing demands of the audit environment coupled with difficulty to attract quality audit staff and resources to provide adequate supervision.
Punishments done to date
- Since 2004, seven public accountants have had their professional practice licences suspended or cancelled by ACRA as reported by Ow Fook Chuen, deputy CEO of ACRA.
- Less severe cases have been dealt with by way of reprimand, mandatory peer review requirement and regulatory course.
I have the opportunity of meeting a few fellow members undergoing “remedial classes” in the last 2 weeks. One has told me of their uncertain fate even after attending their 3-day programme.
Any idea to resolve?
Ms Penelope Phoon, Singapore Country Head, ACCA provided some directions. She said the “anomaly in audit fee levels and the volume of work are therefore locked in a vicious cycle that increases the propensity of firms to overlook critical matters and lose their professional scepticism occasionally”.
One of the keys to breaking this vicious cycle is to understand in a clear way why companies in are paying much lower fees for, many would argue, comparatively higher quality audits.
Do you have any other ideas?