Technical Staff
July 23, 2021
Due to the low audit quality of listed corporations, regulators and watchdogs in many developed nations are closely scrutinizing the public audit profession. For example, The Financial Reporting Council, the UK’s accounting regulator, said “audits performed by the big four accounting firms and smaller rivals failed to meet expectations, raising troubling questions about the financial statements upon which investors rely.”
“Overall inspection results at KPMG did not improve and it is unacceptable that, for the third year running, we found that improvements were required to KPMG’s audits of banks,” the Financial Reporting Council said.
Last month, the “German lawmakers also accused auditors Ernst & Young (EY) of numerous oversight failings and mishandling of the biggest fraud scandal in postwar Germany.” – Wirecard scandal.
On July 22, 2021, Aljazeera reported that “The Indian entrepreneur filed a suit in New York last week, naming Ernst & Young as a co-conspirator in the fraud alongside former executives, and said investors lost more than $10bn.”
Public Company Accounting Oversight Board (PCAOB), Securities and Exchange Commission (SEC), and International Federation of Accountants (IFAC) have significant roles to restore the public confidence in the audit profession. IFAC says ” we serve the public interest by enhancing the relevance, reputation, and value of the global accountancy profession”
In our view, the “reputation, and value of the global accountancy profession” reached low levels. The audit profession is in crisis. We have reasonable grounds to suspect that undetected audit failures are higher than previously thought, particularly in emerging markets. We believe that there is a positive correlation between corruption and audit failure.
