Senior Associate Nick Barnard comments on the FRC’s proposal to increase the duty on auditors:
“The FRC’s proposal to increase the duty on auditors to identify fraud is likely the result of the recent scandals concerning the electronic monitoring contracts between the Ministry of Justice and G4S and Serco. Both of these companies have admitted fraud in their deferred prosecution agreements with the SFO, but in neither instance was this detected by their respective ‘Big Four’ auditors.
“The FRC wants to ensure that auditors understand that fraud can occur in both big and small companies, and that the need to maintain scepticism is essential even if the company is a PLC and has a clean record.
“Whilst auditors have an existing duty to report suspected money laundering, the FRC is concerned that fraud is not understood as being intrinsic to that activity. Moreover, that fraud does not only mean that the client company is the victim.”