However, the institutes, which yesterday published their first annual report on audit regulation, said they were not concerned by the figures. They related to questions covering a range of auditing issues, including independence, competence, quality control, training and consultation on contentious issues.
'The weaknesses thus far identified do not appear to indicate any general shortfall in the quality of audit work carried out by firms but do demonstrate in many cases procedural shortfalls such as a lack of recording of the work that firms state that they have carried out,' the report says. It adds that the questions will also be refined in an effort to improve the quality of information gained.
But Prem Sikka, the East London University academic who is a leading critic of the auditing profession, said the report had done nothing to restore confidence in audits. It demonstrated that self- regulation needed to be replaced by a genuinely independent system of review.
The document - which does not name the firms that fail to meet the standards - covers the 12 months to the end of September 1992. It has been received by Michael Heseltine, President of the Board of Trade, who will consider it along with reports from other accounting bodies expected shortly.
The audit monitoring programme is part of the regulation regime introduced on 1 October 1991 to comply with the European Community's Eighth Company Law Directive dealing with the qualification of auditors.
Although the regime has been in operation for a year, the monitoring unit's routine visits only began in April. The institutes say the results 'are not yet sufficiently representative to provide a definitive statement about the quality of audit work in the generality of firms'.
However, the report shows that the English institute received 175 complaints on matters ranging from non-compliance with the law and inadequate audit work to lack of independence and delays in answering correspondence. Although no regulatory action was deemed to be required in 30 cases, more than half are still being processed. Eight firms were refused registration and a further nine had it withdrawn.Reuse content