Andrew Gambier, head of audit and assurance at ACCA, said:“Audit has immense value to business and the wider economy by supporting trust and confidence in companies’ financial statements and therefore the effectiveness of capital markets in raising capital. In the wake of several recent high-profile corporate failures, however, it is clear that the profession needs to change.
“It’s important that any discussion of improvements to the system, legislation and regulation is focused primarily on improving audit quality, and ACCA will use this as the central premise against which to evaluate the proposals outlined in the respective reviews.
“Another important consideration for any prospective solutions is what those within the audit profession frequently refer to as an ‘expectation gap’; whereby discussions about the future of audit and role and responsibility of the profession are hard and often unsuccessful because there is no general consensus of what an audit can, should and does achieve. Recent ACCA research has shown that this gap has broadened, and recommends that the profession acts proactively to address the public’s concern.
“While the urgent pace of the CMA review helps to reduce uncertainty within the profession, it does raise concerns about the breadth of evidence used to justify the proposed changes.
“ACCA is concerned that there is not enough evidence demonstrating a positive impact on audit quality from the proposals for joint audits or separation of audit and consulting within firms. These proposals risk generating unintended consequences – such as confusion over roles and responsibilities and greater barriers for audit teams in accessing expertise on complex issues – without alleviating the original issue. As a result, this could exacerbate the expectation gap further.
“We support the CMA’s proposal to increase the accountability of audit committees.
“ACCA also supports the general direction of the overarching regulatory framework being proposed by Sir John Kingman. We are reviewing the recommendations in detail over the coming weeks, but certainly welcome such changes as introducing a statutory levy – which provides more security along with greater independence; and the responsibility for approval and registration of audit firms conducting Public Interest Entity audits – this will further focus the regulator’s role and remit in this area.
“With multiple concurrent reviews into the sector, it’s important that there is one final set of conclusions which incorporates a holistic review of the system, an understanding – and addressing of – the expectation gap as it stands, and due consideration of all recommendations to date. The Brydon Review could potentially be well placed to fill this role.
“Further to the above initial thoughts, ACCA is considering all proposals in more detail over the coming weeks. We look forward to working with the CMA, Kingman Review, BEIS Select Committee, Brydon Review and others into the New Year on the most workable solutions for improving audit quality.”