IFAC Paper on Multidisciplinary Firms

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A paper in support of multidisciplinary firms, those accounting firms that offer both audit and non-audit services, has been jointly released by the International Federation of Accountants (IFAC), Chartered Accountants of Australia and New Zealand (CAANZ), and the Association of Chartered Certified Accountants (ACCA). According to the results of a CAANZ and ACCA survey into public expectations of audits “the current rules around non-audit services go beyond what the public expects. For example, over one-third of respondents expressed the view that audit firms should be allowed to provide specific advice on accounting treatment of transactions or advise on tax planning for audit clients, despite currently being prohibited or restricted from doing so by existing independence rules,” the paper entitled “Audit Quality in a Multidisciplinary Firm” states.

The report points to a study done by the PCAOB that found 90 percent of audits conducted by large network firms used the work of at least one specialist and, on average, five individual specialists performed some work on each audit. Substantially all of those specialists were employed by the auditor.

According to the report: “Most existing peer reviewed research points towards an increase in audit quality in cases where a firm offers both audit and non-audit services because it allows for the sharing of expertise and systems.”

Kevin Dancey, IFAC CEO commented: “Questions about audit quality, independence and competition are always worth asking. But no one should rush to conclusions. The business case for the multidisciplinary model is strong and there is significant evidence in support of the model.” Mr. Dancey will be speaking at NASBA’s Annual Meeting in October.