ACCA believes it is vital for the accountancy profession to re-examine the role of audit and to question whether a sufficiently strong case is being put forward for the benefits that audit can provide to businesses, the economy and society. We firmly believe that audit has a key role to play as a source of public confidence in financial reporting but note that there is currently little published research that seeks to demonstrate the value of audit in promoting business trust.
ACCA is seeking to change this situation by holding high-level roundtable events on the future direction of audit in a wide range of markets, and having recently spoken with influential accountants and other business leaders around the world, we put forward the following agenda as a contribution to the ongoing debate.
While we reject claims from those critics who argue that the audit model is broken, we propose that the profession should develop approaches in respect of larger entity audits that pay more heed to the needs of a wider circle of stakeholders than simply current and future investors, and hence meet better the demands of the market.
This, we believe, will be achieved by extending the scope of the audit from giving an opinion on financial statements alone to engaging on issues such as risk management, the effectiveness of corporate governance, and testing the assumptions around an organisation's business model and its likely sustainability.
Would auditors be up to the job? We believe they would – it should not be forgotten that the same firms regularly take on a wider approach to the auditing of public sector bodies, where they report not just on the financial statements (as most bodies provide services rather than make profits), but also cover corporate governance and, in the UK, efforts by their clients to secure value for money for the taxpayer.
ACCA is seeking to change this situation by holding high-level roundtable events on the future direction of audit in a wide range of markets, and having recently spoken with influential accountants and other business leaders around the world, we put forward the following agenda as a contribution to the ongoing debate.
While we reject claims from those critics who argue that the audit model is broken, we propose that the profession should develop approaches in respect of larger entity audits that pay more heed to the needs of a wider circle of stakeholders than simply current and future investors, and hence meet better the demands of the market.
This, we believe, will be achieved by extending the scope of the audit from giving an opinion on financial statements alone to engaging on issues such as risk management, the effectiveness of corporate governance, and testing the assumptions around an organisation's business model and its likely sustainability.
Would auditors be up to the job? We believe they would – it should not be forgotten that the same firms regularly take on a wider approach to the auditing of public sector bodies, where they report not just on the financial statements (as most bodies provide services rather than make profits), but also cover corporate governance and, in the UK, efforts by their clients to secure value for money for the taxpayer.
While extending the scope of an audit may enhance the stakeholder's confidence in an entity's financial statements, the audit firm is still a business whose objective, I feel, is more often than not to maximise profits, hence we may need to look more closely at the audit firm's business model.
Posted by: Nirmal | 09 April 2010 at 20:50
Rather than extend the services, let's fix the attest services - and only then consider additional work that may or may not be an area of expertise for the firms.
Posted by: Norman Marks | 19 March 2010 at 14:30