Audit firms fight to block expansion of fraud detection role
New York | The world’s largest accounting firms are fighting to block new rules in the US that would force them to take more responsibility for rooting out fraud at the companies they audit.
With less than a week to go before the end of a consultation period on the proposal from the Public Company Accounting Oversight Board, they are trying to sign up their clients to oppose the plan, saying audit fees will soar if the changes go through.
There are issues with the audit quality of the big four firms, according to the PCAOB. Roger Stonehouse
The PCAOB’s new rules would widen auditors’ responsibility to scrutinise whether a company is complying with laws and regulations, and to communicate more of their concerns to a company’s board of directors. The proposal comes amid frustration in Washington that audit firms are not living up to their duty to protect investors from wrongdoing by their clients.
The Centre for Audit Quality, a group representing audit firms led by the big four of Deloitte, EY, KPMG and PwC, is asking corporate directors to sign on to a letter attacking the plan.
“Auditors are not lawyers and as a result the proposed amendments would expand the auditor’s role to include knowledge and expertise outside their core competencies,” according to the letter. “The proposal will substantially increase the cost of the audit without a commensurate benefit.”
Existing standards require auditors to detect and report only wrongdoing that directly affects the accuracy of financial statements, while the new rules would mean they have to check for behaviour that could have an indirect effect, for example by putting a company at risk of large fines.
The proposed rules have proven controversial even within the PCAOB, where
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