Audit profession trapped in ‘groundhog day’

AUDITORS need to do more to increase the economic, social or environmental value of the organisations they review, if the profession is to rebuild public trust damaged by failures to spot banks’ bad practices in the run up the financial crash, a report has found.

According to the Royal Society for the encouragement of Arts, Manufactures and Commerce (RSA), the audit profession is trapped in an endless and irresolvable loop of discussion – “it’s very own groundhog day” – on how to regain public trust.

The report, supported by the ICAEW, outlined how, following the financial crash of 2008, trust in the audit profession has been shaken, and challenged the profession to account for its social purpose through becoming more open, collaborative, and focussing on organisation’s outcomes as much as outputs.

It suggested that the profession is caught in a cycle driven by legislators and regulators responding to perceived audit failures, and warned against simply adding further levels of regulation

“Adding new rules in the hope that they will be the right rules to catch the next set of follies might be less effective than inspiring the (audit) profession with a passion for transparency, business improvement and public interest,” the report said.

Michael Izza [pictured], ICAEW chief executive, said: “We have to respond to this public interest challenge, which is to think seriously about how to redesign audit to meet the changing needs of market participants. We should be open to this external scrutiny and willing to take on board recommendations where these will improve overall business confidence.”

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