Call to review relevance of financial audit model

COMPANY FINANCIAL statements have become more complex and less understood than ever before, the incoming president of Chartered Accountants Ireland (CAI) said yesterday.

PricewaterhouseCoopers (PwC) partner Paul O’Connor said the primary role of audited financial figures currently is “to communicate on stewardship and financial position, to deal with the past. Yet for investors and other users of financial statements, their main concern is with the future.”

Addressing the annual general meeting of the CAI, Mr O’Connor said the institute needed to play its part in looking at the relevance of the current financial reporting model.

Mr O’Connor announced two initiatives in relation to audit – the establishment of an audit working group to consider possible future changes to the scope of the statutory audit in advance of publication of the European Commission’s Green Paper on Auditing, and the convening of a Future of Audit forum bringing together stakeholders to discuss these issues.

However, he warned against unrealistic expectations. “It has taken us 20 years to get corporate governance disclosures to where they are today so I would not underestimate the challenge,” he said.

He stressed that expansion in the scope of audits “could only be possible against an appropriate framework and with amendment to the existing liability regime for auditors”.

“It is neither appropriate nor fair for auditors to extend the comfort that they provide when they bear financial liability for not just their own failings but for failings of directors, management and others.”

Mr O’Connor succeeds Tom Fitzpatrick as the 83rd president of the institute. John Hannaway, a partner in PwC Belfast, becomes deputy president, and Austin Slattery, of Austin Slattery Partners in Clare, becomes vice-president.