Phoenix Professional Services Update - Audit Reform 2020

04 February 2020

By Nicholas Killeen

Phoenix Professional Services Update - Audit Reform 2020
The Irish accounting regulator plans to publish a report in the first quarter this year to grade the work of the 8 biggest audit firms in the State for the first time.

The findings will be based on inspections by IAASA, the supervisory authority for the accounting profession, relating to a sample number of statutory audits carried out by the firms in 2018.

The eight firms who have been inspected are EY, Deloitte, KPMG, PwC, Grant Thornton, BDO, Mazars and EisnerAmper. These are auditors to all of the major listed companies, banks and insurers, and hundreds of other public interest entities in the State.

IAASA’s work has focused on certain risk areas within a sample of audits at each firm to ensure that they were carried out effectively.

Each audit will get a grading of between one and four (a score of four will signal that significant improvements are required). Firms will get 12 months to rectify any issues that are identified or face an investigation.

IAASA has the power to impose hefty fines on individuals and their firms for any failings. For individuals, a penalty of up to €100,000 can be levied, and for a firm a fine of up to €100,000 per partner can be imposed. IAASA can also impose various other conditions on firms, and it can convene a panel of experts to conduct a disciplinary inquiry into individuals or firms.

Similar regimes are already in place in the UK and the US, and IAASA reviewed policies in 25 European countries before establishing its own system. It is understood that IAASA plans to publish reports on an annual basis.

What will this mean for us?

With increased motivation to provide a high standard audit, we’re expecting a rise in the already high demand for auditors. In order to ensure that the audit passes, inspection firms have a pressing need to make sure that their audit engagements are fully staffed. Overworked auditors being pulled in several directions due to understaffed teams is a significant cause of these errors.

Challenger firms are bulking their audit teams in expectation of changes to shake up the marketplace. The traditional busy season rush is fast approaching as teams realise they’re not quite as well resourced as they expected. All of these factors are combining to create a sky-high demand for auditors, especially in Dublin and across the UK.

The key to making quality hires during this time is speed. Particularly for any level below assistant manager, it should be a one stage process. Some firms seem to think that a quick process is inherently a less thorough process, which isn’t true. Partner with a Consultant who understands audit, understands your firm and understands the market, and a lot of the due diligence will be done for you.

That way, you can rest assured that you are seeing the best candidates out there and can focus on making sure the cultural fit is there.​

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