FSA pans auditors over client asset reports

Auditors must improve the quality and consistency of their reports on client assets after serious failings were identified, the FSA says.

Providing 'clean' reports despite the firm committing significant breaches of the client asset rules was just one of a number of failings uncovered.

As part of a consultation issued today to drive improvements in this aspect of auditors' roles, the FSA aims to increase the information provided in the reports so it can better utilise it to undertake both firm and thematic reviews.

It also aims to improve firms' governance oversight of both their auditors and their compliance with the client assets rules.

Richard Sutcliffe, FSA client assets sector leader, says: "It is ultimately a firm's responsibility to ensure they have adequate systems in place, but they, as we, rely on their auditors to provide the necessary assurance in this regard.

"Auditors charge a fee for this professional service - it is important that we and firms can rely on the reports they are signing off.

"The actions we have taken recently along with the changes we are consulting on will significantly strengthen the requirements in this regard and also mean that should we fail to see improvements we will be able to take action more easily."

The role of accountants in the banking crisis was thrust into the open in July when the FSA said the profession had not been sceptical enough about the financial firms it audited in the run up to the banking crisis.

The consultation period closes on 31 December 2010. The FSA intends to publish a policy statement during the first quarter of 2011.