UK Finance has recommended that financial services and wider business incumbents adopt ‘continuous tech-backed auditing’ as a long-term corporate discipline.
Business auditing has become a concern for UK Finance, as the trade group provides further leadership guidance on the future threats of fraud and corporate functions becoming compromised.
Updating its financial services members, UK Finance observed that auditors have come under ‘increased criticism over recent months’ – pointing to findings stated by the ‘2019 Brydon Report’.
UK Finance underscored its concern that business auditing has become an ‘only confirm and verify profession’, stating that leadership needs to be more critical and observant of wide-ranging audit functions.
Detailed as a key concern, UK Finance warned auditors of their ‘obligation to make all reasonable efforts to detect material fraud’ and directors’ duty to report on their actions to assess and manage risk.
Scrutiny of fiscal accounts has been placed at the top of global regulatory agendas, following a series of auditing scandals plaguing the ‘Big-4’ global accountancy firms – EY, KPMG, PwC and Deloitte.
The high-profile failures were topped by this summer’s €2 billion account fraud and auditing mismanagement of former Deutsche Boerse payment processing firm WireCard AG, a corporation audited by EY.
Stating that changes needed to be enforced radically, in July the UK Financial Conduct Authority (FCA) signed-off on recommendations of its Financial Reporting Council (FRC) which stated that Big-4 auditors must move to separate their auditing units from consultancy practices.
Big-4 auditing firms have been given until 23 October to submit plans for their pending ‘operational separation’ – a requirement the FCR states will bring transparency to between auditors market duties and commercial activities.
Supporting the need for change and improvements, UK Finance backed the FCR call for UK financial services and wider business to adopt a ‘continuous audit methodology to respond instantly to any signs of potential fraud’.
However, UK Finance implores that financial services will need to radically update their operational processes with regards to handling financial data and further verifying transactions.
Marked as the critical component banks and auditors have been asked to optimise their APIs to both quality and efficiency simultaneously – helping automate error checks and verified transactions in real-time.
UK Finance supported the changes, which it stated are being implemented at a time of utmost concerns as businesses adjust their operations to allow teams to work from home – ‘remote auditing has made further demands on security, and anti-fraud professionals have seen significant increases in fraud.’
