Public and private move closer

A discussion document from the Audit Commission entitled Developing Principles for Public Inspection is not the sort of thing that will set pulses racing. But audit and accountancy professionals, perhaps especially in the private sector, should sit up and take notice and send in their comments. While the consultative document is about the public sector, sooner or later it’s going to apply to the private sector.

The document looks at the many conflicting interests in the fast-developing field of audit and public inspection.

There are the conflicts between audit which is basically adversarial, inspection which is half adversarial and half helpful, and the equivalent of consultancy which ought to be helpful. There is the conflict between what the different audiences for inspection and audit want or need. There is the question of what is sometimes described as ‘moral risk’ – to what extent does audit and inspection let managers off the hook from doing a decent job in the first place. There is the question of cost – audit and inspection is an overhead. How much of this is justifiable compared with resources devoted to actually doing the job.

These questions are in the first place are to the public sector and its auditors. The new or reinvigorated inspectorates look horizontally across, say, the education system or the policing system. But private-sector auditors and stronger and more numerous inspectors will also have to face up to the same issues of conflict versus co-operation, and vertical work versus horizontal work.

Clearly the fiction of private auditors reporting to shareholders is not long for this world. Private-sector auditors working on private-sector companies are soon going to have to work through the same tensions as public-sector auditors, with multiple audiences and across-the-board conflicts to be accommodated.

Sir Peter Kemp is chief executive of the Foundation for Accountancy and Financial Management and a member of the Audit Commission

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