Investor confronts auditors on reform

If auditors were in any doubt that investors are desperately unhappy about the current audit regime, then Standard Life’s Guy Jubb laid them to rest last week.

Jubb, head of corporate governance at Standard Life, launched a pointed attack on the audit profession, which he claimed had failed to adapt to change and now produced reports that were “boiler plate of the highest order”.

He said that auditors needed to adapt to change or “wither on the vine”.
“To my mind it’s been rather like a slow bicycling race, and they are still stuck rather close to the starting line,” he said.

His audience of around 100 of the City’s most prominent auditors and business professionals, including chief executive of the Financial Reporting Council Stephen Haddrill, and a large contingent of senior partners from PwC, sat silent during ICAS’ annual Aileen Beattie memorial event.

Jubb described audit reports as “riddled with get out of jail free clauses” and urged the profession to speak with audit committees and investors, or risk being perceived as servants of management.

“From my standpoint, it takes three to tango – it takes audit committees, it takes auditors and it takes investors,” he said. “We have to dance to the same tune, to the same time; at the moment it is debatable whether we are on the same dance floor.”

Standard Life administers £138.7bn in investment and has offices in Boston, Dublin, London, Montreal, Hong Kong and Sydney.

Seated next to Jubb was one of the city’s most senior accounting figures, PwC’s managing partner Ian Powell, whose firm brought in revenues of £1.9bn last year.

In his own address Powell said auditors must be prepared to change, but believed “significant legal barriers” stood in the way. “The nature of modern company law means there are very significant legal barriers,” he said
“I would welcome a debate about the type of information investors want.”

There is momentum growing in the audit profession to produce more discursive audit reports, however auditors say reform would have
to matched by reform to auditor liability.

What was said

In a brief exchange, PwC managing partner Ian Powell and Guy Jubb, head of corporate governance at Standard Life, clashed when debating whether the profession could expand on the content of its audit reports for individual companies.

Powell: “It can’t be done on an individual company basis.”

Jubb: “I would beg to differ, I don’t see why you can’t do it on an individual company basis… why not have something on a side-by-side basis, tailored for a company.”

Powell: “I think in some ways we are agreeing. We do want more flexibility in our reporting, what I think is appropriate is that if only one firm went out on a limb, with a different form of report, with a different form of opinion… you could actually damage a company, you could lead to a litigious situation.”

Jubb: “Why can not one break ground, do something rather different?”