The leadership of global audit networks should be held to account, and work is underway to see how it can be achieved, according to the chief executive of the UK’s audit regulator.
Currently audit firms can only be regulated at national level, but the big firms all have international leadership.
Stephen Haddrill, of the Financial Reporting Council, said in a speech on Wednesday that international audit standards could be used to focus on leadership of international audit networks.
The subject is a critical topic, he said, because inspections have revealed problems in almost half the audits of systemically important financial institutions in 50 countries.
“And that’s important because UK audits frequently rely on the quality of work overseas,” Haddrill said. “The international networks of the firms must ensure that public interest entity audits and above all major bank audits are done to the highest standards by all national firms.
“And I stress national firms because regulators like the FRC are nationally based and have no authority over the international networks at present. Nevertheless, we look through IFIAR [International Forum of Independent Audit Regulators] to the international firm networks for cooperation in driving strong international performance on a consistent basis.”
He added: “We will explore how standards set by the International Audit and Assurance Standards Board can be used to hold global, as well as local, leadership to account.
“The firms have established themselves as strong global entities and it’s important that they are held to account.”