THE ACCOUNTANCY watchdog yesterday raised concerns about elements of BDO’s audit work following an inspection of seven of the firm’s reports.
The Financial Reporting Council said it was disappointed that BDO has not fixed some problems it flagged up in a 2009 review, and argued that the firm was in breach of ethical standards by continuing to reward staff that cross-sell other services to audit clients.
Though the FRC’s inspections are based on a handful of audit reports and the body has few powers of censure, its findings are closely watched within the industry.
The watchdog said it was worried about “the level of professional scepticism” in five out of seven BDO audits, warning that accountants had not challenged the client firm’s claims strongly enough on issues around asset values, payroll costs and goodwill impairments.
BDO said it supported the FRC’s drive to raise standards. “We are committed to continuous improvement in everything we do and therefore keen to act on constructive feedback in the context of the high standards that we already apply throughout our work, and for which we regularly receive positive feedback from clients and regulators,” said Paul Eagland, head of audit and tax.
Rival firm Grant Thornton (GT) was also criticised over a shortage of professional scepticism, after the FRC found that five out of ten audits it examined could be improved.
The FRC also asked GT to “ensure that the firm’s strategy to target growth does not have an adverse impact on audit quality in practice”.
GT said in a statement: “We are pleased that they have acknowledged the improvements we have made based on their previous observations, recognised our efforts and have no recurring issues.”