Outrage as government signals audit reform on ice
“Priority” audit reforms have been bumped from the government’s list of incoming legislation, surprising few but angering many within the accounting sector.
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The reason why the audit reforms were "dropped" from the list of bills to go before Parliament is quite simple and obvious. The corrupt major audit firms have lobbied (bribed) the ministers to drop it and as we know Her Majesty does not make any choices herself, she merely does as she is told.
What about other priorities? The article above does not discuss this issue, but there were other legislative changes that did make it into the speech. Was there one item that was included that is really less important than the audit reforms? If so then it might have been a better use of parliamentary and civil service resources to work on the audit reforms rather than that other project. Otherwise, we may have to accept that a pandemic and now war have created extra work that bumps other things downwards on the 'to do' list.
Please Mark Taylor, and other journalists writing for Accounting Web, present information in a rational and objective way. There are two major ways in which the above article fails to do this, in addition to generally emotional language. These two major points are:
1. The heading "Outrage as government signals audit reform on ice" is true but selective. Presumably there were also people who were relieved at the delay, and presumably other reactions too. The title could have been 'Reactions to the delay to audit reform', which is neutral and avoids giving a potentially misleading impression.
2. The discussion of legislative priorities repeated reasons why audit reform is seen as important by many people but did not outline the legislative changes that the government has decided are more important uses of the available time. If those other changes had been just mentioned then a fair minded reader would have had the opportunity to think about whether they agreed with the government's assessment of relative need. The article mentions more than once that the government had dropped the changes despite previously saying they were 'a priority'. But dropping changes that are 'a priority' is not in itself contradictory. Other changes were also priorities, but apparently higher priorities in the minds of the government as things currently stand.
The other side of this question is that in reality the problem with auditing is that it hasn't really moved with the times. It is now a box ticking exercise where auditors seek to prove that they have done their job so they cannot be blamed for missing something.
They are, after all, watchdogs not bloodhounds.
I'm sure times have changed since I last did 'big' audits but the attitudes then were on ticking off the rather more directed audit programmes that then existed. But then, as I assume is now the case, deviation from the programme was discouraged. We often found areas where suspicions were raised and, indeed, had been raised in previous years but they were generally brushed aside rather than investigated - after all you don't want to rock the boat!
It is a fact that there will always be Directors and Managers who for various reasons will 'adjust' the figures a bit here and there to show better results or hide their defalcations or excessive expenses and it isn't always easy to see it - well it wouldn't be would it?
Then, of course, there is the problem of 'it's a very large fee and we don't want to lose it' which inevitably colours the way in which the auditor looks at any problems - plus a bit of the old boys network I expect.
Quo vadis?
Well I think it is necessary that large audits are not done for more than two years before a change of auditor. This would, at least, allow a fresh set of eyes on the subject and remove some of the incentive to auditors to turn a blind eye to problems. Yes it would increase costs but the benefit would be better audits.
Secondly I think that in really big audits a 'wandering auditor' might be helpful. A person who has a brief to look at what catches his eye or his colleagues' eyes. It was Carillion's downfall that a new employee spotted enough to cause her to blow the whistle. We need more detailed involvement and less box-ticking.
No perfect answer - the obvious one would be a state audit agency but the state is so totally incompetent that that would never work in a million years.
Perhaps now the big firms have had to withdraw from Russia (involuntarily I suspect) they should have the spare staff to up their game a bit.
The other thing that surprises me (though not a lot) is why have ICAEW, ACCA and the like not dashed forward with plans to rectify the situation instead of making more money for themselves by fining the naughty firms? Surely this is primarily the reason they are there. Are there a lot of large firm representatives driving the Institutes? - he asked naively.