Incoming ICAI Head Reveals Audit Concerns

by Robin Pilgrim, for LawAndTax-News.com, London

11 May 2004

Speaking as he assumed the role of President of the Institute of Chartered Accountants in Ireland (ICAI), KPMG audit chief, Terence O'Rourke warned that more and more accounting firms are considering moving away from the provision of audit work.

Suggesting that recent corporate collapses such as those experienced by Enron, Worldcom, and Parmalat clearly demonstrate the importance of a well-conducted audit, Mr O'Rourke nevertheless observed that:

"The regulatory atmosphere in which auditors are working has become increasingly difficult. The truth is that despite the critical role audit plays in the effective operation of financial markets, some audit firms are seriously considering, in the face of increasingly difficult regulation, whether they want to be involved in audit at all."

Warning of the potential dangers of unlimited liability for audit firms, he went on to explain that:

"The reduction of the big five to the Big 4 for example, shows that even the largest firms can be vulnerable. We need to ask ourselves whether it is in the public interest that the number of firms capable of conducting large PLC audits be reduced further in the future. It is possible and that is why it is on the political agenda in the UK."

The new ICAI chief further observed that:

"In Ireland we need a calm and proper rational debate from a public interest and equitable perspective. Additionally, in Ireland, auditors are also now burdened with a back-breaking plethora of statutory responsibilities for identifying and reporting on issues such as fraud, breaches of company law, money laundering - with an impossibly wide definition of what constitutes the proceeds of illegal activities - and tax malfeasance."

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