The Audit Inspection Unit (AIU) has called for
the UK arm of PwC to increase its communication on independence
issues with audit committees.

In the UK AIU’s annual inspection report it
said that the Big Four firm must “ensure the threats to the firm’s
objectivity and independence arising from non-audit services
provided to audit clients and related safeguards are reported to
audit committees”.

The AIU, a part of the Financial Reporting
Council, said that while PwC has addressed all of the issues raised
by the watchdog in 2011 some new ones have arisen such as
independence disclosure.

In response PwC UK told the International
Accounting Bulletin
that audit quality is of paramount
importance for the firm.

“Our audit teams’ job is to be focussed on
delivering high quality audits and that reflects the culture of
auditor independence of the firm,” PwC said.

The AIU also said the proposed provision of
non-audit services to an audited entity on a contingent fee basis
should require the ethics partner of the firm to either to approve
all such arrangements personally or to monitor on a regular basis
any approvals given by others.

FRC auditing director Paul George said that
across the board among Big Four firms the level of non-audit
services provided to audit clients continues to decline.

 “And, the concern we have across the
industry is that the firms are being insufficiently specific in the
identification of threats [to independence] and the introduction of
safeguards for those threats,” George explained.

The AIU also warned PwC to ensure there is no
“adverse impact on audit quality as a result of the firm’s
initiatives to improve audit efficiency in the light of competitive

The inspection reports of the UK’s Big Four
audit firms have been issued following the release of its general
annual report earlier this week, which called for firms to maintain
quality controls as they look for efficiency gains to mitigate fee

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