There was a recent article on economia highlighting the words of Professor Olaf Blik in the Netherlands who said that “auditors of failed companies are being blamed for everything when the question should be not only where was the auditor, but also where was the accounting department of the audited company, management, the internal auditor, the audit committee? “All parties need to play their role.””
One of my roles at William Scott Associates is to share relevant industry news and of late it feels there is anon stop “audit bashing”. Professor Bik’s words are the only supportive words I have read in a long time and I applaud them! Auditors often work unforgiving hours and as he points out they are only human so mistakes will be made. In my view auditors are not in place as a safety measure – the responsibility for honest and transparent financial reporting should lie with the company in question.
We also shouldn’t forget that auditors are not paid the same as those in other areas of finance so with the amount of negative press surrounding audit at the moment combined with the attractive salaries of corporate finance or consulting it’s no surprise that after 3 years of studying and qualifying the majority of ACA/ACCA students look to launch themselves out of audit as quickly as possible, thus draining the talent pool. And when you’re losing talent faster than you can attract it then there is the increased risk to quality.
I met with a firm recently who admitted they had previously accepted applications from candidates who required extra training support. The candidates may have had exam fails but the interviewers had identified talent which they felt they could nurture and build on. Now however, the same company cannot afford to hire those candidates in case it risks the quality of their audits due to the immense pressure from the FCA and politicians. It’s not only the candidates who are suffering the consequences but also companies who are considered ‘risky’ are struggling to attract companies to audit them for fear of bad press.
All the while, changes are being demanded by regulatory bodies (after a huge amount of investigative work) only for some politicians to disregard their recommendations as an electoral policy.
My hope is that industry leaders are listened to and improvements are made in support of the auditors who work hard to form and report an opinion on whether the financial statements prepared by directors do in fact give a ‘true and fair’ view, as required by company law, to shareholders. We all need to play our role in supporting an industry that deserves better.