Iaasa, Ireland’s Auditing and Accounting Supervision Authority, released disturbing results from its 2023 inspections, revealing that a substantial 23% of audits of public interest entities (PIEs) from that year required betterment. This is more than double the figure from the quality evaluation done in 2022.
Iaasa, under the supervision of its CEO, Kevin Prendergast, performs annual assessments by randomly selecting audits of PIEs conducted by seven accounting companies. PIEs, which fall under this purview, range from banks and insurance companies to firms publicly traded on the stock exchange.
Last year, Iaasa evaluated 31 audit documents as part of its inspections, with seven of these needing enhancement, and the remainder classified as satisfactory. But, the reassuring part was that none of the files demanded considerable improvement, the authority mentioned in its sector-level findings statement.
In contrast, the improvement needed for audits censused in 2022 was only at 11 percent.
Findings about the audit work from seven PIE firms, BDO, Deloitte, EY, Grant Thornton, KPMG, Mazars, and PwC, in the state will be disclosed on the following Monday.
Iaasa noticed consistent observations about financial statement disclosure review, associated party transactions audit, and governance communication in the inspected files.
Mr Prendergast explains that Iaasa’s inspection team uses risk-founded methods to detect higher risks of inferior audit performance more effectively, which does not necessarily mirror the overall audit performance caliber.
Although improvements are needed, there is hope as Iaasa continues to work closely with these audit companies within its jurisdiction to facilitate quality enhancements in audits performed.
Since 2016, following European Union audit renovation, Iaasa commenced evaluating and grading PIE firms. After some back and forth, it started publishing observations on individual firms from 2020 and has done so annually since, making it one of the most open reviews in Europe.
The new strategy of audits and reviews, known as the International Quality Management system (ISQM), was deployed in 2023 reviews. This change was prompted by numerous audit complications with major corporations over the last ten years, which disrupted the industry worldwide.
Unlike previous methods which simply set out the regulations that audit companies were required to adhere to, the current standards demand that these firms create, introduce and maintain a top-level management system for audits or reviews of financial records or other related assurances or services.
Since taking on direct oversight for auditing public interest entities in 2016, the Irish Auditing and Accounting Supervisory Authority (IAASA) has imposed penalties on eight individuals. Notably, five of these charges were delivered just in the previous year. Two former auditors from the Irish branch of Wirecard, the discredited German payments company that failed in 2020, were included in this. They faced serious penalties for “significant” deficiencies in their auditing practice, totalling €30,000.
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