In the nine months since I joined the Financial Reporting Council, investors have not beaten a path to my door to talk about the value of audit.
The FRC exists to promote high standards of corporate governance, reporting and audit, so we need to understand whether investors are satisfied with what they get from auditors. It is true that investors want to see a clean audit report before investing in a company and few of us want our pension funds to be invested in companies whose accounts were not properly audited. So why the apparent apathy?
The problem for investors is that the corporate world now operates within a very short time horizon. Share price movements are monitored in seconds and rapid global economic changes impact on investor confidence more than historic data. In such a world, the value of company reports, let alone audit, has been called into question.
But are we in danger of failing to appreciate something today that could be much more valuable in the future? Should we be thinking about how we can improve the value of audit and asking the question: is it achieving enough?
At the FRC, we are developing our answers to these questions with help from an advisory group that includes leading representatives from the profession, companies and investors. We plan to publish a discussion paper later in the year.
The European Commission is also working on the same issues and this month the House of Lords Economic Affairs Committee begins its own investigation into the role of auditors and the state of the market in the UK. In this analysis, there is no point expecting auditors to make judgments on issues where they have no qualifications or expertise: that would set them up to fail.
Yet auditors do have a depth and breadth of knowledge across different industry sectors that regulators should be able to draw on to mitigate risks and take action, and action in the interests of the macro economy. And we also need to explore whether the audit report can say more about the relative level of risk that the company takes.
We also live in a litigious world and, if we do ask auditors to do more in areas where they are qualified to make judgments, I am not sure we can ask them to run the risk of a liability suit.
That could be a major deterrent to audit market competition and quality. It is therefore important, as we consider ways for auditors' expertise to be put to greater use, that the issue of auditor liability is addressed at least in respect of any new audit requirements, if not more generally. Such a step would be in the interests of the economy as a whole.
Stephen Haddrill is chief executive of the Financial Reporting Council.