Sir, – I am writing to respond to your editorial "Big Four, big fees from Central Bank" (June 24th). The editorial included the following two assertions: "the banking crisis – to which the Big Four accounting firms have, in particular, made a significant contribution", and "the role of the Big Four in the banking collapse has yet to be adequately investigated, and properly explained". The former statement appears to be based on a misconception of what is involved in a financial statements audit, while the latter ignores the work undertaken by Prof Peter Nyberg and the House of Lords select committee.
Audits of company financial statements are carried out in compliance with legal requirements specified in the Companies Acts. Their purpose is to enable the auditor to express an opinion on the financial statements prepared by the company, notably on the truth and fairness of the financial position reported. This opinion must be formed on the basis of the best evidence available at the time. The audit is not intended to provide assurance on the business model being operated by the company, nor on future strategies or risk appetites. So the audit is not some form of “catch-all assurance” on an entity’s operational health or viability. The role of auditors has been investigated here, and in the UK, by Prof Nyberg and the House of Lords Select committee respectively. Prof Nyberg concluded that auditors had, by and large, complied with their legal responsibilities, though he challenged current orthodoxy on the role and scope of audit and whether it remains fit for purpose.
This is the challenge that the auditing profession must now meet head on, and Chartered Accountants Ireland is playing an active and constructive role in responding to this challenge. – Yours, etc,
RONAN NOLAN,
President,
Chartered Accountants
Ireland,
Pearse Street,
Dublin 2.