CROWE CLARK WHITEHILL needs improvement according to an Audit Inspection Unit report.
The report said although the firm maintains an overall system of quality control which is appropriate for its size and nature of the client base, concerns were raised that areas flagged up for improvement, from a previous AIU report, have not been adequately addressed.
The AIU outlined six areas for audit improvement including increased focus on ethical matters; enforce audit partners and staff training as mandatory; ensure audit quality plays a role in remuneration and appraisal of staff; react quickly to areas identified as problematic; improve audit cash and investment balances; and improve audit disclosures such as obtaining evidence and recording judgements.
In a series of check-ups of firms’ work by the AIU, five of CCW’s audits were reviewed with two deemed to a “good standard with limited improvements required”, and three performed to an ‘acceptable overall standard with improvements required’. It outlined that CCW would need to pay attention to two particular areas in future audits.
Audit of cash and investments: Three of the five audits failed to obtain third party confirmation on material cash or investment balances.
Audit of disclosures: On all five audits a weakness in the audit of certain disclosures was identified. On three of the cases reviewed insufficient consideration on whether amounts held should be disclosed as cash or short-term investments.
Two audits also highlighted a break-down in communication between CCW and the audit committee over non-audit work. It was revealed there were risks of “material misstatement and threats to independence and safeguards adopted for non-audit services”.
In a response to the AIU’s findings CCW said: The report show[s] a marked improvement compared to the results from the 2008/2009 inspection. We believe this improvement demonstrates not only a desire to improve audit quality but also our willingness to engage with and respond positively to recommendations made by the AIU.
“We are disappointed that the AIU has found that we have not made sufficient progress on some findings from the previous review and we have undertaken to ensure that these matters are progressed as a matter of priority.”
The AIU’s latest round of audit inspections also included reviews of Baker Tilly, Mazars and PKF.