PwC starts roundtable discussions on future of audit

With a number of reviews into the audit process due to report soon, PwC has decided to take a proactive approach to changes in the market.

Chairman and senior partner Kevin Ellis has sent a letter to 7,000 stakeholders and investors announcing a series of roundtable discussions on the topic. They will start in Birmingham on December 14, and continue around the country.

The firm has also set up a dedicated webpage, pwc.co.uk/futureofaudit, where anyone interested can join in the discussion.

The Competition and Markets Authority is due to publish its report into the future of the sector next month. Following a series of scandals including the collapse of Carillion, public trust in audit has waned. Options are being discussed including a break-up of the Big Four, and audit sharing to allow smaller firms a share of the market.

A watershed moment

In the letter to stakeholders, Kevin Ellis was clear on the responsibility of the firms themselves to engage in and lead the process of change.

“At PwC, we have said publicly that we believe our sector is at a watershed moment – and we’re open to change.  We’re committed to working hard and constructively with regulators and Government on the areas under review,” he wrote.

He emphasised that critics of the process have “valid concerns.” In particular, the sector needed to move with the times and provide a more forward-looking assessment of an organisation’s health. The audit model should account for the fact that shareholders want more performance information than is provided by the ‘back half’ of a company’s accounts, he said.

“There are no easy answers and we don’t believe that a single remedy, or a single participant, can resolve the challenge,” he said.

Kevin Ellis has previously said he is not in favour of a break-up of the Big Four.

Five key questions

The letter, sent on November 26, laid out five big questions which will be addressed in the regional discussions taking place from next month. These are:

• Who should the audit be for? Just equity shareholders?  Or should a wider range of stakeholders be able to rely on our work?
• What should the audit cover? Today, our audit opinions cover historical financial performance – but is assurance needed over future viability, operational risks, or non-financial performance?
• Should the focus continue to be on a binary “true and fair view”? Or instead on a more subjective account of significant business and financial risks?
• Does one size of statutory audit fit all organisations?  Should our largest listed companies, with the greatest public interest, face a greater degree of scrutiny than a smaller, owner-managed business?
• And finally, how will technology enhance the future of the audit? Would automated assurance over real-time data free up human auditors to concentrate more on exercising judgement over a refined set of information?

These events will culminate in a final roundtable in London on February 11, and a resulting white paper which will be openly available.

“Audits help underpin trust in UK business and in wider society.  We are committed to evolving the audit to ensure that stakeholders receive the independent assurance they need,” said Kevin Ellis.