Global forum finds continued problems in public company audits
Auditors must address the quality and consistency of their work to reduce the "high levels of deficiencies" in key areas of public company audits around the world, according to the International Forum of Independent Audit Regulators (IFIAR).
IFIAR's 2014 Survey of Inspection Findings found the highest number of audit inspection deficiencies in the core areas of fair value measurement, internal control, and revenue. Deficient work was identified in the following areas:
- Internal control testing (24%)
- Fair value measurement (20%)
- Revenue recognition (14%)
For audits of "systemically important" financial institutions, including global banks and insurers, the survey found the biggest problem areas were auditing of the provision for loan losses and loan impairments; internal control testing; and auditing the valuation of investments and securities.
The areas with most deficiencies in inspected audits of listed public interest entities, or public companies, relate to: auditing fair value measurements; internal control testing; and revenue recognition.
IFIAR believes that enhancing the professional scepticism of practitioners contributes significantly to quality financial statement audits and should be a high priority for audit firms. It has advised firms to review their staffing structures to ensure that sufficient and appropriate expertise and experience is available for increasingly complex entities.