PARTNER TRAINING AT PWC could be improved and appraisals reviewed, the Financial Reporting Council’s audit watchdog has said.
In its latest report on PwC, the Audit Inspection Unit (AIU) said that the partner appraisal processes should be reviewed. Currently the partner responsible for audit engagements does not evaluate performance based on audit quality, which should be included.
The AIU also highlighted that, although the firm has introduced mandatory half-day training for partners working on high-profile audits, this should be rolled out to all partners and directors.
A total of 14 audits were assessed. Eight were performed to a good standard, five to an acceptable standard with improvements required, and one required significant improvements.
Concerns highlighted in the report include six cases where there was insufficient evidence of involvement from auditors during the planning stage, as well as one case that lacked an explanation about why a full scope audit of procedures was not undertaken.
PwC also came under fire for issues surrounding communicating with audit committees. The AIU found two cases of unadjusted misstatements were not reported to the audit committee, in a further two cases, aspects of audit planning and/or audit findings failed to be communicated properly.
In nine cases, there was insufficient reporting to audit committees of the nature and extent of threats to the firm’s objectivity and independence arising from non-audit services.
Another concern highlighted was the potential loss of audit quality as the firm battles competitive pressures.
As previously reported by Accountancy Age, the AIU warned competition between firms could damage audit quality as practices try to increase the volume of audits they can perform.
PwC said it had launched an Audit Transformation programme to improve audit quality. However, the watchdog was concerned it is aimed at improving efficiency by reducing audit hours. The AIU warned PwC should “ensure that there is no adverse impact on audit quality as a result of its initiatives to improve audit efficiency in the light of competitive pressures”.
However, the AIU said it had seen improvements at PwC following last year’s investigation.
James Chalmers, UK head of assurance PwC, said: “Quality is at the very heart of what we do: it is essential to our reputation, important to the work that we undertake for our clients and is a fundamental strategic objective for the firm.
“We therefore welcome your report and the findings noted during your inspection process. Such insights, observations and recommendations are an important contribution to helping us focus on and deliver continuous quality improvement.
“As in previous years we remain committed to addressing the issues that you have identified during your review. We have already completed several of the agreed actions in response to the issues that you have raised and plan to implement the remainder of the detailed action plan that we have agreed with you over the coming months.”
Prime minister May outlines tax incentives to boost high-tech business, and further corporation tax rate cuts, to the CBI
The application of robotics in finance functions is moving faster than predicted. Although, companies are cautious in how they are applying artificial intelligence to ensure results first, many are stepping up their investigations
EU competition commissioner Margrethe Vestager has defended the decision to order technology giant Apple to pay €13bn (£11bn) in back taxes to the Irish government
Carillion has announced the appointment of a new finance director as it reported a rise in first half profits and sales led by strong growth in its support services business