The UK accounting regulator would like audit
firms to establish centralised safeguards to ensure audit quality
is maintained as firms look for efficiency gains to mitigate fee
pressure.
The Financial Reporting Council’s (FRC) said
firms are facing significant pressures in the current economic
environment and that substantial reductions in audit fees have
occurred in a number of recent audit tenders for large listed
entities.
“While acknowledging that fee pressures are a
commercial reality that cannot be ignored, we remain concerned that
audit efficiency is becoming progressively more important to firms
as audited entities seek to reduce fees,” the FRC said.
The regulator called on firms to maintain
appropriate controls to ensure audit efficiency gains do not impair
audit quality, particularly where the extent of audit procedures
performed are dependent on judgments relating to materiality,
scoping or sample sizes.
The FRC reviewed 94 audits conducted by some
of the largest UK accounting firms in its 2011/12 inspection
report, which was released today.
