Big Four auditors do not apply enough
professional scepticism and consistency in audit procedures,
according to the UK audit watchdog.

The number audits requiring ‘significant
improvements’ is also too high and there are concerns over current
safeguards to ensure non-audit services do not conflict with audit
work.

The Audit Inspection Unit (AIU), the
inspection arm of the Financial Reporting Council, handed down its
verdict following the inspections of all the Big Four accounting
firms.

The overriding sense is that audit quality
policies and procedures are up to scratch but
too many improvements are still required.

Ernst & Young had no audits that were
deemed exceptionally poor, PwC had one that required significant
improvement, while Deloitte and KPMG had two.

At Deloitte, the AIU identified weaknesses in
the audit evidence obtained, specifically in relation to goodwill
and other intangibles, the evaluation of going concern and pension
scheme audit.

The AIU also indentified two instances where
non-audit services provided to audit clients by Deloitte breached
principles in ethical standards.

KPMG was criticised by the AIU for signing off
incomplete audits and making changes, including balance sheet
changes, to accounts after signing and before printing in some
instances.

There were independence issues on three KPMG
audits where partners or staff had been involved in the audit in
senior positions for more than seven years.

In the AIU’s inspection of the
PricewaterhouseCoopers, it found one audit required significant
improvements in support of audit judgments on the evaluation of
goodwill impairment.