Interesting Links for 09-11-2012
- Has the EU Budget been rejected by auditors for the past 18 years?
(tags: eu money fraud ) - Republicans control the House of Representatives because of massive gerrymandering
(tags: usa politics fraud ) - What to do if you see your identical double
(tags: hallucinations ) - Obama regrets promising new Game of Thrones book
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"Has the EU Budget been rejected by auditors for the past 18 years?"
I'm not going to look at the last eighteen years of reports, but I will look at this year's, released by the European Court of Auditors earlier this week. The fullfact.org article doesn't link to the report, but you can read it here: http://eca.europa.eu/portal/pls/portal/docs/1/18180743.PDF
The first point to make is that neither the Mail nor the Telegraph, the two newspapers mentioned in the fullfact report, actually use the term "rejected by auditors", although the Mail does use the phrase "refused to sign off", which is technically not true (i.e. there is a signature), but is arguably just a journalistic abbreviation of "refused to sign an unqualified opinion", which as I shall show is correct.
The European Court of Auditors, much like any other auditor, does not "reject" a set of accounts. If everything was presented fairly in all material respects, then the auditor's opinion would state this. This is commonly called an "unqualified opinion". If not everything is presented fairly in all material respects, then there is a range of other opinions available to an auditor and these are laid out in international auditing standards (ISAs). I can see from the "Auditor's Responsibility" paragraph in the report that the European Court of Auditors does its audit to these standards just as any other auditor would do.
In the commercial world, most audit opinions are unqualified. For a listed company to have anything other than an unqualified opinion would be disastrous. For privately owned companies, other opinions are more common, although still rare.
The most common "other" opinions would include:
* "Fundamental uncertainties", where the auditor was unable to form an opinion on one or more material or potentially material areas of the accounts, but was otherwise happy. An example would be a situation where the company's ability to continue as a going concern in the near future depended upon winning a certain contract, but there was no indication at the date the audit report was signed if the tender was successful.
* "Limitation in scope" opinions, where the auditor was not allowed to audit a material or potentially material area of the accounts. An example might be not being allowed to properly audit year end stock because at the year end, most of it was on a ship somewhere in the Indian Ocean.
* "Except for..." opinions, where the auditor is happy with the accounts, except for one or two particular areas where the company has perhaps not complied with applicable accounting standards. An example might be a company that insists on not depreciating freehold buildings because they claim that their maintenance programme means that they don't need to.
The two most serious audit opinions would be a "disclaimer" opinion (which is basically where the auditor throws his hands in the air and cries because the client's accounting records are in such a mess that it is impossible to conclude that they show a true and fair view of the company's affairs) and an "adverse" opinion, where the auditor believes that the accounts are materially misstated. In the commercial world, and indeed in UK public sector accounting, these are rare.
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