Both Ernst & Young and PricewaterhouseCoopers have said that fees for audit work will have to rise. But these hikes could also signal a sea-change in the way audit is viewed by the firms – and their clients.
Until recently, audit was pretty much seen a stepping stone from which firms could sell more lucrative services. A highly competitive market, with cut-throat pricing, meant there was very little value left in providing audit services to a firm alone.
Many began to see it as a loss leader, while the clients themselves viewed the audit process as little more than a necessary evil.
This has all changed now, with the scandals that hit Enron and WorldCom ushering in a whirlwind of change and new laws. From the Sarbanes-Oxley Act to the combined code on corporate governance, the way a company conducts its business and the figures it produces are under more scrutiny than ever.
Inevitably, the downfall of Andersen has meant that companies and firms are feeling the pressure more than ever before to ensure the numbers are just so. Not only are firms having to explain to customers that this will mean price rises, but the clients are themselves wanting more from their audit than they would have asked for previously.
This price hike may not be a bad thing, as long as any increases represent a subsequent rise in the service provided.
While no-one is suggesting that what has been done before by firms was sub-standard – with perhaps a few exceptions – the extra concentration on what, in many cases, is the lifeblood of a firm’s work can only be of benefit to all concerned.
No longer should audit be just a means to an end but the standard-bearer of a firm’s commitment to quality.
Of course, competition will still continue, but perhaps winning client contracts with the lowest-price audit is no longer the major driver from the firm and its clients.
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