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June 14, 2012

AIU calls for greater independence disclosure at PwC UK

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 pressures”.

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 pressure.

Related article

FRC calls on firms to maintain quality controls

 

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