Peter Mitchell - Getting to grips with auditing
Our profession, and the English ICA in particular, is facing change from all directions – internally, internationally and from Europe.
But to lead the world into the next millennium on accountancy standards and financial morality, we first need to make sense of statutory audit.
In its current discussion document, the trade department anticipates few problems with its further deregulation proposals to widen audit exemption to European levels.
Individual small companies will require audit if sought by shareholders or lenders but, for most, the professional accountant will focus on commercial advice, plus compliance with Companies Acts and corporation tax requirements.
The time for prevarication appears to be over. Attempts to cling to the past will be ineffective – much better to debate how the large company and plc audit should now be carried out.
Audit is an acceptable obligation for large companies, albeit more beneficial if directed to preventing fraud rather than providing standard confirmations.
Optimising the impact of the audit requires ‘real-time’ application, with a continuous internal review.
Plc audit seems to form a natural part of corporate governance, suggesting neither external nor internal auditors can be deemed independent if reporting to the executive director who employs them. Recent history confirms how chief executives can sway auditors, resulting in reporting being compromised.
For plcs, a second independent supervisory board, to whom the main board and external/internal auditor report, should perhaps become a statutory requirement rather than best practice.
Logically only one set of auditors is required for this function and future training may need to reflect wider commercial contribution with direct involvement in internal auditing anticipated.
Thus there is life without audit for small professional accountants and, the quicker our institutes accept this challenge, the sooner we can concentrate on what is significant and beneficial for our clients.
– Peter Mitchell is chairman of the Small Practitioners Association.