Auditing profession: no review needed

A casual reader of last week’s Accountancy Age would be forgiven for
concluding that I am calling for a review of the auditing profession.

Let me be absolutely clear ­ I am not.

The next reporting round will be one of the most challenging for directors
and auditors, and one of the most important for investors; the last thing needed
now is any such distraction.

Nor is there any case for a review. Following Enron, even though there had
been no audit failure in the UK, the government initiated a comprehensive review
of the regulatory regime of the accountancy profession whose recommendations,
supported by parliament and the profession, brought into being the present
regulatory structure for the independent setting of standards, the independent
inspection of audit firms and the independent oversight of the professional
institutes, through the Financial Reporting Council and its operating bodies.

These new arrangements have served the interests of users and preparers well.

There has still been no audit failure: on what possible basis could a further
review be justified?
It is clear that the combination of fair value accounting, responsible reporting
by directors and auditors’ insistence that financial instruments are properly
marked to market, has provided investors and others with transparent and
comparable data on which to base investment decisions.

The fact that the response to that data has been for investors to sell, and
to continue to sell as worsening conditions are reflected in each iteration of
results, is testimony that financial reporting is working well, despite the
acknowledged difficulties of valuation in illiquid markets, rather than any
failure of audit.

We are in the worst financial crisis in living memory and once it is behind
us it will, of course, be the case that every aspect should be examined and
improvements made where appropriate.

Corporate reporting and auditing should not be excluded, not because of any
failure, but rather to see whether the scope of auditors’ work, or the form of
reporting, could be enhanced. PwC certainly stands ready to play its part in

There is no justification for shooting the messenger just because the message
is unpleasant.
Once the dust has settled, though, there may be a case for exploring whether the
messengers’ scope should be increased.

Peter Wyman, global leader, public policy and regulatory

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