The Irish Auditing and Accounting Supervisory Authority issued a consultation paper on its plans to tighten requirements on auditors as they assess companies’ financial statements
The Irish Auditing and Accounting Supervisory Authority (Iaasa) is planning to put a greater onus on auditors to look for potential fraud in company accounts after developments in the UK following a series of financial scandals.
The Irish accounting watchdog issued a consultation paper on Monday on its plans to tighten requirements on auditors as they assess companies’ financial statements.
The body wants to amend a current audit standard known as ISA 240 to require auditors to “obtain reasonable assurance” that company accounts they are looking into do not mislead due to fraud.
It follows on from the UK’s Financial Reporting Council’s (FRC) move in May to insert this requirement into its auditing rule book.
In line with Iaasa’s policy to adopt the UK standards, Iaasa intends to adopt the revised standard with minimal amendments and does not propose to add any new Irish requirements to the changes made by the FRC, the Irish authority said in the consultation paper.
Iaasa said it plans to inset a paragraph into ISA (Ireland) 240 clarifying that “while the risk of not detecting a material misstatement resulting from fraud may be higher than the risk of not detecting one resulting from error, that does not diminish the auditor’s responsibility to plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement due to fraud”.
The greater focus on the role of auditors in detecting fraud and rule tightening stem from recommendations in a report written by former London Stock Exchange chairman Sir Donald Brydon in 2019 on the state of auditing, in the wake of the failures of cafe chain Patisserie Valerie and construction firm Carillion.
However, auditors have long argued that there is a so-called expectations gap between what they see as their role and what is expected by the public, politicians and media. Concerns were raised during a consultation period in the UK on its rule amendments that the changes will merely add to auditors’ already extensive “box-ticking” requirements.