New year, new audit?
2008 might have been the year in which the credit crunch took hold, but next year could be the year of the audit crunch
This is for two reasons. First, critics of the current form of audit could
receive all the evidence they want for proving their point in the shape of a
huge scandal involving an auditor and its work on credit crunch related matters.
Though there are rumours in the marketplace, there is little evidence yet of
anyone taking the plunge and lodging papers at the High Court.
Critics have questioned the role of auditors for some time but the public
denunciations remain, for the most part, vague. Should the auditors have been
able to give warnings in 2006 reports that something was going awfully wrong? At
this point in time the most likely answer to that question is that some form of
structural reform is required. The House of Commons Treasury committee is to
examine this very question as part of a fresh look at the fall-out from the
banking crisis. This will be fascinating to watch because, though the committee
has no powers to directly reform anything, its report may create momentum for
change.
This might be to give auditors more of a strategic role. Already there are
those in the profession who believe auditors hold vast volumes of data that
could be provided to a regulator so the systemic risks from banks, and their
investments, can be better monitored, or even adjusted, depending on the powers
that might be made available.
Given that, one thing does appear clear. If the profession does avoid a
scandal, the new regulations that are on the horizon for banking and financial
services will provide work for them and even new tasks with possibly a much more
critical regulatory role.