Auditors are often thought of as quiet, unassuming types – a stereotype which isn’t wholly untrue – but we clearly need to do much more to communicate to clients and other stakeholders the real value of the work we do. That was the consensus of a panel discussion organised by International Accounting Bulletin I attended last week, which included delegates from the Big 4, as well as mid-tier and smaller networks.
The lack of appreciation of the value we deliver has manifested itself in downward pressure on audit fees. The concern here is that, while accounting firms and networks like RSM are committed to maintaining and raising audit quality – even more so following the financial crisis - downward pressure on fees is undermining that objective.
In many cases the principle source of financial information investors have is the audit report itself, but the audit report is still predominantly a tick-box exercise with little personal insight from the auditor. There is pressure from a number of sources for auditors to provide more detailed disclosures in their reports (as they already do in France), which would make reports more insightful, and have the corollary benefit of enabling auditors to better demonstrate the value they add.
The reality, however, is that most consumers of audit reports have little grasp of the depth of analysis, and the problems the auditor has solved, before being able to produce a report that is an accurate reflection of an organisation’s financial position. Yet our profession has a long history of standards, quality control, peer review and inspections – all of which enhances the credibility of the information we provide. Shouting from the rooftops may not be our style, but we can certainly do better at talking ourselves up.
Another issue came up, which produced contrasting views, and I think is worth mentioning. A practitioner of the Big 4 present on the panel said that the organisational structure of accounting firms has no bearing on audit quality. I beg to differ. Networks structured like RSM have rigorous quality control standards that must be met by member firms. We have rejected applicants which associations would, and have, accepted. That’s a pretty important distinction, and one that the market needs to be clear on.