You might also be interested in
Replies (5)
Please login or register to join the discussion.
Thy should do what should have been done a long time ago, make audits a standalone activity, and not allow them to do non-audit work.
This would force them to split the companies into essentially 8 businesses, 4 audit, 4 advisory.
This then removes a lot of the conflicts of interest. It would take time for the companies to diverge from their "pals" but over time if you restricted movements between "audit" and "advisory" for say a 5 year wilderness period they would in time become independent businesses.
The other option is to nationalise auditing, and have it as a branch of HMRC, paid for by the businesses themselves. This may be more effective from a tax point of view but would be perpetually subject to cuts and government interference.
Makes sense re the conflicts issue, but still leaves just four, a wider field would still be preferable.
If the next tier firms are reluctant to tender re cost and time, the creation of say a streamlined automated tendering platform (think internet dating for audit) might make smaller firms more willing to pitch- of course would need stakeholder willingness to use smaller firms, but the big four are themselves doing a pretty good job of making the argument that size does not guarantee satisfaction.
Here's a further idea - publish audit evidence in the accounts of large listed companies. I'm thinking bank confirmations, listings of debtors (to assess counterparty risk), detailed P&L schedules and similar. If privacy is important to you don't take public investment.
Sunlight is best disinfectant.
The reality is that the directors hire and fire the auditors so they can never be truly independent.
Perhaps if the auditor was chosen by a Government department - a bit like the insolvency practitioner rota and could not be sacked by the client without good reason, they would be more robust in standing up to the client when difficult issues arise.
Can't see life as a low - mid ranking civil servant appealing to many of the current crop of self employed audit partners.
Auditors' value to society lies not in the audit but in the other services and advice that they can deliver despite being auditors.