LONDON (Reuters) - Britain’s accountants received the most stark warning yet over auditing standards as the nation’s leading financial regulator threatened punitive action for failure to properly check how financial firms record client assets.
Financial Conduct Authority (FCA) Chairman Charles Randell said that, while adherence to the FCA’s “CASS” regulations has improved significantly in recent years, some auditors have not invested enough in building their understanding of the rules.
“We continue to see client asset reports that are just not good enough,” Randell told an audience of accountants on Thursday. “We continue to monitor this area, but be warned: we have a very low tolerance for CASS failings.”
The FCA has powers to fine companies that breach its rules.
Randell’s blunt warning follows recent criticism from lawmakers that the Big Four audit firms — KPMG, EY, PwC and Deloitte — are failing to spot problems at companies and need shaking up to increase competition and quality.
Accountants have come under the gun since the financial crisis left taxpayers to bail out banks only months after they were given a clean bill of health by auditors.
“Ten years on from the start of the financial crisis, there’s still much more to be done to ensure that accountants in general, and auditors in particular, play their part in supporting markets that function well,” Randell told members of professional accounting body ICAEW.
Randell said he was “very disappointed” with the results of the latest review from the accounting sector’s watchdog, the Financial Reporting Council, which showed a decline in audit quality at the Big Four, especially in bank audits.
“The profession needs to address audit quality as a matter of urgency,” Randell said, adding that auditors need to show “robust scepticism” and an ability to challenge management at companies they audit.
Reporting by Huw Jones; Editing by David Goodman