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Audit's future placed under the microscope

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12th Apr 2016
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Mazars has joined the wave of introspection in audit, launching its manifesto to keep its audit and assurance relevant.

In a statement accompanying the launch of its audit manifesto, the firm said that its objectives are “to ensure that its audit and assurance services are relevant, bring value to companies and their many stakeholders and are delivered by excellent, committed and truly independent professionals”.

The broad objectives outlined by the firm’s audit manifesto are:

  • Committed to the public interest, and to the relevant interest of investors in companies large and small.
  • Promoters of the importance and value of independent audits.
  • Practitioners of the highest calibre, supported by teams of experts and technologies that foster the best audit approaches and results, consistently dedicated to excellence in client service.
  • Innovators in a range of assurance offerings that enhance the transparency in, and therefore trustworthiness of, the real drivers of company value.
  • Stewards of a business model – a highly successful, internationally integrated professional partnership that is paving the way in the global audit and assurance market. 

The future of audit

Mazars audit vision statement was accompanied by the release of two lengthy pieces of research by ICAS and the FRC on the future of audit.

ICAS’s research identifies eleven areas of difficulty faced by modern audit, covered in four broad categories: The context of the specific audit engagement; the development of audit personnel; firms as suppliers of audit services; and interactions with stakeholders and society.

In the context of increased accounting and systems complexity, the research notes, “The auditor’s ability to understand the business is critical for an effective audit function”.

Specifically the research raises concerns over “the routinisation of audit processes and reliance on checklists to ensure compliance with standards”, which undermines the modern auditor’s development of soft skills like “psychological awareness” and “courage”.

Recruiting the best

A big concern that ran through both research papers is audit’s struggle in attracting and maintaining the best talent. The second paper specifically stressed the crucial role that recruitment will play in audit’s future success, criticising “early career specialisation”. “It holds negative value-adding consequences for individuals’ subsequent contribution to audit, as it sacrifices breadth of experience for a narrow focus.

“This was also raised as a reason for firms struggling to retain staff in their audit divisions. A suggestion was made to include industry-related traineeships in the audit profession’s training model. By the time individuals reach managerial levels, industry specialisation was considered to be appropriate.”

Instead, the research suggested firms should pivot their focus to the development of mid-career professionals. “Lateral hires will need to be made, bringing more senior people with direct industry experience or key specialist capabilities into the audit team.”

The paper noted the quality and diversity of graduates attracted to the audit profession was also lacking.

This was put down to audit’s image problem with young graduates viewing audit as “risky, over–regulated, offering poor work/life balance, possibly boring and with onerous entry and complex update requirements”.

Audit team of the future

ICAS’s research identifies its vision of what a modern audit unit should look like. An audit team should feature: “Those with a core specialism in accounting and audit, those with a core industry specialism who receive appropriate training in audit and those with specific core specialisms required by the particular audit assignment who receive appropriate training in audit”.

The challenge then, said the research, will be “achieving compatibility and cohesion within such a diverse team”. “[This] will necessitate a cultural shift in attitude by the firms to accommodate this new structure. Partners will also need training in how to manage the inevitable change in team dynamics that are likely to result from this change.”

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By Sheepy306
12th Apr 2016 20:10

Spin and blah
The next time I receive an ACCA inspection and I'm asked what checklists, audit manuals and procedures I used, I'll just tell them that this year I mainly used "psychological awareness and courage". I probably then won't have to worry about doing anymore audits after that.

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