BDO warns of ‘costly’ audit recommendations
25 March 2020
Financial Review 25 March 2020
The parliamentary inquiry into audit quality's interim recommendations could prove "costly and challenging" for both smaller companies and audit firms, the country's leading mid-tier accountancies warn in today’s Financial Review.
Link to full AFR article: https://www.afr.com/companies/professional-services/bdo-grant-thornton-warn-of-costly-audit-recommendations-20200319-p54bqq
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Quoted in the AFR article, BDO national audit leader, Tim Kendall, commented on the audit inquiry’s recommendations in relation to internal control recommendation and proposed changes to financial reporting dates.
Financial reporting deadlines
“The current compressed financial reporting time frame means that significant audit effort is necessary during a short period of time each year which places unsustainable pressure and stress on our people,” commented Mr Kendall
“We suggest that there is a need to extend the financial reporting timeframes to allow more time to prepare and have audited financial reports. This extended timeframe would allow for better audit quality as tasks will not be undertaken with limited time by people under great stress.”
Financial reporting dates
“At the moment, most listed companies prefer to have June year ends because they release to the market at the same time and the analysts can compare the information,” commented Mr Kendall.
“Changing the financial year ends of companies would allow the audit effort to be spread across the year. This change would assist with phasing the workload and reducing pressure on auditors and in turn I would expect significant improvements in audit quality.” The year ends of companies could be determined based on industry sector to retain the ability to compare results of the same types of entities for the same period.”
Internal control recommendation
“We believe that users are interested in how directors’ manage risk and the adequacy and effectiveness of the internal control environment in place and whether it is robust enough to prevent the company failing, to enable complete and accurate financial reporting and to prevent and detect fraud.” commented Mr Kendall.
“We believe that a requirement for directors and management of listed companies and other Public Interest Entities (PIEs) to provide a statement in these areas is a good and appropriate step forward to emphasise to users their already existing responsibilities in these areas.”