The Canadian Public Accountability Board released a second report on its inspections of accounting firms, finding that accounting firms need to enhance existing auditing practices.
According to the board, most firms need to enhance existing practices, though a small number of firms have a more urgent need to make substantial improvements to their internal controls, their tendency to accept clients that pose an unacceptable risk, their failure to implement new auditor independence rules, and to provide better training on current accounting and auditing rules.
The report is based on the board's inspection of 23 public accounting firms that audit more than 5,500 public companies, representing 80 percent of Canada's public companies. The board's first report, released in October 2004, focused on the Big Four accounting firms. The latest report notes that many of the changes that it recommended to those firms have been implemented.
"While our inspection process did indicate that improvements are required in a number of areas, we are encouraged by the cooperation we have received from audit firms," said board chairman Gordon Thiessen. "Every one of our recommendations has been accepted by the firms, and they have given us written commitments that problems identified will be fixed."
As a result of the inspections, all firms have received recommendations for change, which must be met in 180 days, the board said. Requirements have also been placed on an unnamed four firms, which will be barred from accepting new audit clients until improvements are made. The full report is available at www.cpab-ccrc.ca.
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