International accounting group finds ‘serious problems’ in 40% of audits

Written on Mar 14, 2018

Global accounting watchdogs identified serious problems at 40% of the audits they inspected last year.

According to the International Forum of Independent Audit Regulators (IFIAR), accounting lapses were identified at two-fifths of the 918 audits of listed public interest entities they inspected last year.

The audit inspections focused on organizations in riskier or complex situations such as mergers or acquisitions, according to the IFIAR, whose members include 52 audit regulators around the world.

The most common issue identified by these regulators was a failure among auditors to “assess the reasonableness of assumptions.”

The second biggest problem was a failure among auditors to “sufficiently test the accuracy and completeness of data or reports produced by management”.

The findings have intensified concerns about weaknesses in the auditing process, an issue that has been thrust into the spotlight over the past 12 months following a string of high profile accounting failures around the world.

The report showed that 41% of the problems identified by audit regulators last year related to independence and ethics. These included accounting firms failing to maintain their independence due to financial relationships with clients and failing to evaluate the extent of non-audit and audit services provided to clients.

Many firms also failed “to implement a reliable system for tracking business relationships, audit firm financial interests, and corporate family trees”, the IFIAR said. Its research was based on feedback from 33 audit regulators who inspected the work done by 120 audit firms.

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