Mario Christodoulou, Accountancy Age, Monday 11 October 2010 at 09:47:00

Firms attempts to seize initiative amid attempts to reform audit industry

PwC-audited companies will be asked to publish more on their internalaccounting judgments, as the accounting giant seizes the initiative amid growingattempts to reform the audit industry.

The firm, which audits 39% of the FTSE-100, will ask its clients to revealmore information about sensitive internal accounting judgments ? an ongoingdemand of investors who complained that auditors fail to convey valuableinformation to the market.

PwC auditors will ask audit chairmen to reveal more detail about internalaccounting judgments on a voluntary basis. Andrew Ratcliffe, senior auditpartner with PwC, said he was unsure how the audit chairs would react, but hopesto have more sensitive information in the public domain by February.

?We will ask what are the key judgments and assumptions that the auditordiscusses with the audit committee when he completed his audit,? he said.

?When I think of audit committee chairs I have known I can think of ones whowould think this is a great idea and others who would say ?I?m not sure I wantto do this?.?

PwC also aims to convince companies to release information on significantmisstatement risks in a bid to better reveal the work auditors do behind thescenes.

?For an intelligent reader of accounts, 90% of this won?t come as asurprise,? he said.

?For the less informed reader, it prompts them to say ?I should be looking atthis area of risk?,? he said.

The move was met with some support by investor groups who have long saidshareholders would benefit from better information on internal accountingjudgments.

?We very much welcome this and more transparency about accounting judgments,?said Liz Murrall, corporate governance and reporting director with theInvestment Management Association.

The comments come as the European Commission prepares to release a greenpaper on audit competition, due later this month, and the House of Lords prepares to hear evidence on the issue next week.

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