FSA proposals to improve the quality of auditors’ reports on client assets are set to cost regulated firms that use auditors between £280 and £2,500 a year.
The regulator has published a consultation paper on how to improve auditors’ reports on client assets, following a review of auditors’ reports in 2009.
It found that a number of auditors provided unmodified or ’clean’ reports despite the firms having committed significant failings of the client asset rules.
The review also found that in some cases a client assets report was not provided because the auditor did not understand or was not aware of the reporting requirements.
Auditors were also submitting reports years after the period they related to, and included errors such as the auditor not signing or dating the report.
The FSA has moved to remedy these failures with a series of proposals, including the type of reports it requires from auditors.
The regulator also wants to set up a standard format for the reporting template, with a standard template for the auditor’s opinion and a separate template to explain any breaches of the Client Asset Sourcebook.
The cost of implementing these changes will be met by any regulated firm that uses an auditor to produce a client money or client asset report.
Based on auditor estimates which suggest the changes will require an extra two to five hours of additional work per firm, the FSA estimates ongoing annual costs of £280 to £2,500 per firm.
The annual cost to the auditing industry is estimated to be between £7,000 and £60,000.
The consultation closes on December 31 2010 and a policy statement is expected next year.
The FSA says firms can expect future consultations to focus on improvements to the part IV permission regime for firms that hold and control client money.