BT and Rolls-Royce investigations: Auditors are not there to find fraud, says accounting body boss
Accounting investigations into audit sign-offs of two British stalwarts are not a sign the profession is in crisis, a senior figure at the Institute of Chartered Accountants in England and Wales (ICAEW) said today.
But Vernon Soare, the ICAEW’s chief operating officer, admitted there is an “expectation gap” over the role of the auditor.
KPMG is being probed by the Financial Reporting Council (FRC) over audits of Rolls-Royce between 2010 and 2013. The engineering giant admitted to bribery and corruption allegations earlier this year.
Meanwhile, at the end of the June the FRC launched an investigation into PwC’s sign-off of BT‘s accounts. This followed the revelation of an embarrassing £530m accounting black hole in the telecoms giant’s Italian arm.
Nearly a quarter of BT’s shareholders expressed their dissatisfaction with PwC at yesterday’s AGM.
But Soare stressed there is a gap between the level of detail people expect auditors go into and the level they need to go into by law.
“I think one of the problems is the expectations of what an audit is there to do is very high,” he told BBC Radio 4’s Today programme.
Read more: Investors kick out at PwC at BT’s AGM for failure to detect Italy fraud
The audit is not there to be a forensic review of every transaction that passes through the books of a company, where there are millions of transactions.
Soare said he suspected members of the public and investors “think it should be doing far more than that”.
He added: “It is not there primarily to find fraud. It is defined in company law that the auditors give a true and fair opinion of the company’s accounts.”