Auditors need to do much more to show that audit adds value, or risk the process being seen as irrelevant, according to a panel of experts debating the current state of the audit profession at the RSM annual conference last week in London. The conference, from 4th-7th November, was attended by over 280 delegates from across the global audit, tax and advisory network, representing over 70 countries worldwide.

The panel – comprising Richard Caturano, Chairman from the American Institute of Certified Public Accountants (AICPA); John Capper, Executive Director of the European Group of International Accounting Networks and Associations (EGIAN); Olivier Boutellis-Taft, CEO of the Fédération des Experts Comptables Européens (FEE); Professor Arnold Schilder, Chairman of the International Auditing and Assurance Standards Board (IAASB); and Gu Ren-rong, Managing Partner of RSM China CPAs – painted a challenging environment, but agreed that the importance of audit had never been greater.The panel concurred that the global financial crisis had raised issues of trust for the profession and called into question the relevance of audit in terms of providing an early warning system.

Professor Arnold Shilder explained how a greater focus on the risks impacting businesses had led to a need for more information, but that doubts about the ability of the audit profession to provide meaningful information needed to be overcome. 

Olivier Boutellis-Taft agreed, adding that with increased demand for transparency and higher ethical expectations, the need for auditors to provide assurance was greater than ever.

John Capper pointed out that, of the 160 or so European banks that were bailed out following the financial crisis, all had received clean bills of health from auditors, and that there is now a real danger that the profession will have to contend with a third layer of regulation from the EU as a result of the perceived market failure.

As Bob Dohrer, Global Leader of Quality and Risk for RSM, who chaired the debate, observed: “If as auditors we are not warning the market of systemic risks, then what is the process there for? Some of the changes being suggested could have a revolutionary impact on the audit profession. It is up to us to raise our game – or face greater regulation and public scepticism.”

The dominance of the Big 4, and the arguments for and against compulsory auditor rotation, were discussed in some detail during the panel debate. 

Despite the power of the Big 4, in China at least, market dynamics, rather than regulation, is the greatest threat to Big 4 dominance, according to Gu Ren-rong. He pointed out that RSM China CPA’s, which is the fifth largest firm in the country, will be challenging the Big 4 on fee income over the next year or so.

Also arguing against regulation, Richard Caturano said that mandatory audit rotation should be opposed as a matter of principle. Firms outside the Big 4 keen to gain a greater share of the audit market should focus on having stronger networks and delivering better client service, rather than hoping for regulatory intervention, he said. 

John Capper took a slightly different stance arguing that, while he was not in favour of compulsory auditor rotation, regulation might be the only way to improve competition. Joint or shared audits might be a better solution, he suggested, than plain rotation, which might simply result in audits being passed around the Big 4. 

Jean Stephens, CEO of RSM, concluded: “The kind of information that auditors are ideally placed to provide is more vital to the global economy than ever before, yet the value of the audit – under question due to recent market events - is now more discredited than ever. As a profession, we must take a leading role in re-shaping the audit process and re-affirming the independence, worth and reliability of auditors to deliver that much needed information.”