Regulator criticises work of UK auditors when it comes to annual reports

AUDITORS such as KPMG and PricewaterhouseCoopers (PwC) must do better when it comes to compiling a key part of companies’ annual reports, their UK regulator warned.

The “Other Information” section is often inadequate and doesn’t meet the same standards as other parts of the report, even though it contains information vital to investors, the Financial Reporting Council (FRC) said. The regulator told auditors to implement better procedures and targets and to place more emphasis on non-financial information.

The report is the latest blow to an industry that’s been criticised for alleged failings in the global financial crisis and in corporate collapses such as this year’s Carillion liquidation.

Much of the problem arises from misunderstandings, the FRC said. The opinion that an auditor provides on a report’s financial statements doesn’t cover the “Other Information” section, something that investors often don’t realise, according to the regulator. The FRC said it would look at whether auditors should be required to take more responsibility for the information in this section.