Leader: Audit 'baby steps' are pragmatic

by Kevin Reed

More from this author

22 Feb 2013

  • Comments
leader-logo

THOSE WANTING audit market revolution are likely to be disappointed.

The Competition Commission today says that the market isn't working well, and changes are required. However, no-one would say that it's proposals are anything more than relatively gentle - direct and disruptive intervention it ain't.

The arguments for evolution rather than revolution are strong. Grant Thornton and BDO wouldn't really want audit work and tendering foisted upon them. They want the channels to market opened up, not made more onerous.

The commission is right to call for investors to step up to the plate. It is imperative that they get more involved in the audit process, rather than continue with this strange abdication of responsibility that sees management effectively pick and choose their auditor. Investor activism has certainly made boards sit up and take note in recent years - but it would be nice for the investment community to be more proactive, as opposed to indignant reaction.

While the commission is seemingly less concerned about the proliferation of ex-Big Four in regulatory roles, what must be highlighted is the seemingly unbreakable circle of Big Four partners moving into FD roles, who are subsequently very 'comfortable' having a Big Four firm in as auditor. But this is a chicken and egg situation - non-Big Four firms picking up bigger audits would see boards more comfortable picking non-Big Four accountants into top finance roles.

Another hurdle to overcome is that of making audit more forward-facing. This will inevitably involve more audit work to be undertaken, and greater risk of litigation. Such a move seems more likely to block entrants into the market.

But ultimately the commission is right - it will take a series of measures that help to change buying behaviour, and it won't happen overnight.

Kevin Reed is editor of Accountancy Age and Financial Director

Visitor comments

blog comments powered by Disqus
display:none

Add your comment

We won't publish your address


By submitting a comment you agree to abide by our Terms & Conditions

Your comment will be moderated before publication

Submit
  • Send

conservatoire-for-dance-and-drama

Finance-Director-part-time

Conservatoire for Dance and Drama, London, Permanent, Part Time, £60,000 pro rata

 

 

Newsletters

Get the latest financial news sent directly to your inbox

  • Best Practice
  • Business
  • Daily Newsletter
  • Essentials

Careers

Search for jobs
Click to search our database of all the latest accountancy roles

Create a profile
Click to set up your profile and let the best recruiters find you

Jobs by email
Sign up to receive regular updates with the latest roles suitable for you

Briefings

budget-management

Why budgeting fails: One management system is not enough

If budgeting is to have any value at all, it needs a radical overhaul. In today's dynamic marketplace, budgeting can no longer serve as a company's only management system; it must integrate with and support dedicated strategy management systems, process improvement systems, and the like. In this paper, Professor Peter Horvath and Dr Ralf Sauter present what's wrong with the current approach to budgeting and how to fix it.

cchcover

iXBRL: Taking stock. Looking forward

In this white paper CCH provide checklists to help accountants and finance professionals both in practice and in business examine these issues and make plans. Also includes a case study of a large commercial organisation working through the first year of mandatory iXBRL filing.