THE QUALITY of Deloitte’s future audits could be put at risk as a result of cost-cutting measures intended to tackle rising pressure on fees, the Big Four firm has been warned.
In its latest probe into Deloitte’s audit work over the past year, the Financial Reporting Council’s audit watchdog said there is a risk the “quality of future audits may be impacted by these fee pressures and the resulting initiatives to improve efficiencies”.
“The firm should ensure that it continues to focus on audit quality and give particular attention to its audit policies and guidance in areas where the extent of audit procedures performed are dependent on judgments relating to materiality, scoping or sample sizes,” the Audit Inspection Unit (AIU) said in its report.
The comments are similar to those made in the AIU’s annual report into the state of the audit market, in which it found that firms had been cutting costs by off-shoring certain audit procedures, delegating work to junior staff, using more checklists and other efficiency measures.
Of the 14 audits inspected by the AIU, six were performed to a good standard, seven audits were performed to an acceptable standard, while one audit required significant improvement in relation to the audit scoping for financially significant components of the group.
“On one group audit, the extent of the audit scoping for financially significant components required significant improvement, as it was not clear to us that the combination of the work performed by the group audit team and the specified audit procedures undertaken by the component auditors provided an appropriate level of audit evidence,” the AIU said.
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