Rachael Singh, Accountancy Age, Tuesday 14 September 2010 at 10:49:00

A report by a division of the FRC has found that improvements should be madeto the way audit reports are carried out by Deloitte

Inspectors found significant improvement was required in two of Deloitte'saudits around the area of impairment testing.

The Audit Inspection Unit, part of the Financial Reporting Council, looked at14 audit reports compiled by Deloitte and found two required significantimprovement, two were to an acceptable standard and ten were performed to a goodstandard.

The AIU found an error in the goodwill testing model, with the implicationsmeaning an overstatement of the available financial "headroom".

In another inspected audit, the Deloitte team gave "insufficient"consideration to a major customer announcing a credit squeeze.

The AIU identified various areas for Deloitte to improve its auditingservices, including evaluation of controls over significant risks andcommunicating with audit committees.

Vince Niblett, MD audit at Deloitte, said: "We are committed to retaining ourfocus on audit quality and recognise that we are on a journey of continuousimprovement."

He added the firm has implemented a number of actions in response to theAIU's report.

Other findings in the report include 26 non partners at Deloitte areauthorised to sign off audit reports in addition to the 184 UK audit partners.

The AIU estimates the firm has approximately 301 audit clients, including 21FTSE 100 clients, and 60 FTSE 250 ones.

Further reading:

FRCdelivers verdict on audit firms

Inspectorsflag up KPMG stock-take audit concerns

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