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Is true-ish and fair-ish good enough?

Saturday's nail-biting rugby inspired Philip Fisher to consider that audit regulators are missing a trick. Is true and fair outmoded in a world that is obsessed by accuracy?

25th Mar 2021
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 A rugby ball manufactured by Gilbert rugby, laying on a rugby pitch
istock_rugby-ball_RichardMisters

You can spot genuine accountants a mile off. They are the people like this writer who, while watching the rugby match between France and Wales on Saturday evening, found their thoughts occasionally tripping towards our delightful profession.

One could not help but admire the dedication and commitment of every player on the field, while the excitement was palpable as Wales saw their Grand Slam aspirations disappear well beyond the last minute.

As someone who typically finds rugby union inherently boring, this was a real eye-opener.

Unprecedented demand for accuracy

It has long been recognised that sporting prowess tends to improve from generation to generation. In the last few years, there has also been an unprecedented demand for accuracy to the closest millimetre and millisecond, which can have unintended consequences.

The rugby match on Saturday took about 20 minutes longer than its allotted time, primarily because instead of relying on the judgement of a single referee, aided by a couple of touch judges, decisions are taken by a quorate committee.

Cricket is up to four or five umpires now, while significant decisions on Saturday started with the referee and whatever the two men running the line are now called but then extended to “Barnesey” watching a TV screen.

Arguably, he was eventually more influential than any of his three colleagues.

The intention was to ensure that every decision was considered and perfect. To this accountant’s untrained eyes, at least one was palpably incorrect but overall there were far fewer errors than would have been the case in the good old days.

What has this got to do with the world of accountancy?

The quality of audit

While deferring to those who have pursued careers in auditing, the general impression most of us, not to mention the general public, have is that the quality of auditing is lower than it was a generation ago.

Certainly, the statistics coming from the FRC every time that it inspects the largest firms suggest that they get it quite seriously wrong at least 25% of the time and quite possibly 50% of the time.

While sport has sought to put its house in order by bringing in extra safeguards and measures, our profession is, if anything, going in the opposite direction.

It has long been clear that the primary measure that determines the quality of an audit is how little auditors can get away with for the fee, given that they claim to be losing money on the deal.

The difference between auditing and sport, or for that matter many other businesses, is that the measure used is 'true and fair'. This leaves much open to interpretation – and boy is it interpreted.

Given the use of technology and the general tendency in society to supplant rough and ready with a much higher bar of accuracy, maybe it is time for the powers that be to consider whether auditing should be tightened up with its own third umpires and TV referees.

In doing so, one has to believe that there would be far fewer bad reports and many stakeholders could be saved from losing large sums of money as a result of fraud or the inability to recognise that a company was no longer a going concern.

Surely such a change is long overdue given that it would both improve the quality of work and the reputation of the profession, which might be no bad thing in either case.

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