My guess is that over the next 5-15 years we see a lot more residential development in city centres. I don't think the big commercial property boys will be out of pocket in a massive way unless they fail to adopt.
I would also add that apart from self-review threat, I don't think there's anything particular about *non-audit* services which impair independence more than the provision of *audit* services. If a sizable chunk of your portfolio is with client A that will be a real challenge to your independence whatever work you do for that client.
I see your point and I think your concern is sensible and well founded, notwithstanding that your arrangement would likely comply with the ethical standard.
For this reason, I would advocate a split firm approach for us SME auditors, where one firm acts as the outsourced FD, helps out with the technical side of the audit (for example, doing the cashflows to justify going concern, and justifying the accounting estimates), and does the tax and accounts without worrying about independence, and the second firm does a pure audit.
At the medium firm end, I think a model the regulators should encourage is where one firm takes on the "accounting" role and prepares the tax and finstats for the company as a kind of outsourced FD, and assists in the audit without having their hands tied behind their backs by ethical and independence constraints, and another firm does a pure audit.
I suspect it will be a more effective audit and a better service to the client overall.
For example, accounts prep and corp tax for a straightforwards service business with t/o of £30m and would be 5k - £10k, and you could get a decent audit done for £8k. If one firm did both, I suspect the fee would exceed £15k.
Not sure I understand the premise. Why are you any more conflicted by the fact that you earn your daily bread by taking management's money to report back to them if they are lying to you then a big 4 partner?
I think with the contraction of firms willing to get involved, this is increasingly a seller's market. Audits with unrealistic budgets are an absolute killer because they can go on and on. They are fundamentally different to accounts preparation. It's all very performative, but boxes must be ticked - budget is key.
You could not get a compliant audit for a completely dormant company done for less than a grand.
I am full of admiration for Ms Jones for not letting the b* grind her her down.
On the technical side, I think this stretching the definition of "erred in law" to breaking point. The FTT failed to draw obvious conclusions from an email chain that tax had been deducted less £20 that nobody could or should have to explain.
That was not erring in law - that was erring in common sense.
It's completely arbitrary. Some of my annual payrolls were processed early March - they qualify. Some were processed in late March - they don't. It's impossible to explain to clients, because it is capricious and arbitrary.
I think the key sentence I disagree with is this one "Standard-setters should avoid artificially deflating asset bubbles in financial reporting, which they did not create, and thus cannot remedy. "
If we define a bubble as an unsustainably high market valuation of an asset, standard setters aren't actually trying to deflate those asset bubbles. As you rightly say, that's not their calling. All standard setters are looking to do is to ensure assets are reported at a more objectively correct valuation.
My answers
My guess is that over the next 5-15 years we see a lot more residential development in city centres. I don't think the big commercial property boys will be out of pocket in a massive way unless they fail to adopt.
I would also add that apart from self-review threat, I don't think there's anything particular about *non-audit* services which impair independence more than the provision of *audit* services. If a sizable chunk of your portfolio is with client A that will be a real challenge to your independence whatever work you do for that client.
I see your point and I think your concern is sensible and well founded, notwithstanding that your arrangement would likely comply with the ethical standard.
For this reason, I would advocate a split firm approach for us SME auditors, where one firm acts as the outsourced FD, helps out with the technical side of the audit (for example, doing the cashflows to justify going concern, and justifying the accounting estimates), and does the tax and accounts without worrying about independence, and the second firm does a pure audit.
At the medium firm end, I think a model the regulators should encourage is where one firm takes on the "accounting" role and prepares the tax and finstats for the company as a kind of outsourced FD, and assists in the audit without having their hands tied behind their backs by ethical and independence constraints, and another firm does a pure audit.
I suspect it will be a more effective audit and a better service to the client overall.
For example, accounts prep and corp tax for a straightforwards service business with t/o of £30m and would be 5k - £10k, and you could get a decent audit done for £8k. If one firm did both, I suspect the fee would exceed £15k.
Not sure I understand the premise. Why are you any more conflicted by the fact that you earn your daily bread by taking management's money to report back to them if they are lying to you then a big 4 partner?
I think with the contraction of firms willing to get involved, this is increasingly a seller's market. Audits with unrealistic budgets are an absolute killer because they can go on and on. They are fundamentally different to accounts preparation. It's all very performative, but boxes must be ticked - budget is key.
You could not get a compliant audit for a completely dormant company done for less than a grand.
I am full of admiration for Ms Jones for not letting the b* grind her her down.
On the technical side, I think this stretching the definition of "erred in law" to breaking point. The FTT failed to draw obvious conclusions from an email chain that tax had been deducted less £20 that nobody could or should have to explain.
That was not erring in law - that was erring in common sense.
It's completely arbitrary. Some of my annual payrolls were processed early March - they qualify. Some were processed in late March - they don't. It's impossible to explain to clients, because it is capricious and arbitrary.
I think the key sentence I disagree with is this one "Standard-setters should avoid artificially deflating asset bubbles in financial reporting, which they did not create, and thus cannot remedy. "
If we define a bubble as an unsustainably high market valuation of an asset, standard setters aren't actually trying to deflate those asset bubbles. As you rightly say, that's not their calling. All standard setters are looking to do is to ensure assets are reported at a more objectively correct valuation.
"Labour productivity ratios". I'm sorry, I'm none the wiser.