Demand for auditors will remain strong despite challenges
With audit and accounting at a crossroads, LSCA Technical Committee Chair Jamie Tomlin reflects on the changes over the past three decades, but remains convinced the quality of people in the profession will ensure demand for its services will continue.
Over the past 30 years, a working life for some, an entire lifetime for others, the accountancy profession has witnessed huge changes. As an example, the development of accounting standards has moved through various bodies, the ASC, the ASB, the FRC and onwards.
Auditing has followed a similar path. Each step change in oversight has been made for a reason, typically arising from a (perceived) weakness in the replaced body. Each time the profession has been wary of what comes next, a not unreasonable human response.
But if I were to compare the auditing and accounting today with what I first witnessed on starting out in the profession what would I find?
There is far greater choice about how to prepare financial statements and what to include in them. I doubt this has arisen from the 1980s consumer demand for greater choice, but from a better understanding of the balance between a user’s needs, the costs of meeting those needs and what is ‘right’ for a preparer to provide.
This has enabled preparers to adopt a framework that is more reflective of what they want. Financial statements are undoubtedly more suited and in proportion to the different intended users. This is a good thing.
The quality of audit, in my opinion, and despite what the press and recent events may suggest, is better than it was. The period has seen substantial changes in accounting requirements and the ways business operates, both of which have made the job of the auditor substantially harder than it ever was. In spite of this, or perhaps because of this, I do believe there has been improvement in audit.
But are we at a crossroads? As the value of a business becomes increasingly influenced by intangibles, do financial statements provide the information that a user may find helpful? Is the linear structure of financial statements really as relevant today as it has traditionally been, or should it be modified to reflect the advancement of technology? Should we, as auditors, be given greater acknowledgment of the existence of information asymmetry and the ‘challenge’ between management and the auditor in understanding how decisions and choices are made and what drives them?
The Kingman review of the FRC and the proposals to take forward the recommendations will certainly create interesting times, which hopefully will continue this arc of improvement. Unlike the plateauing of life expectancy, I am hopeful that the profession will remain positive for the longer term, despite the challenges.
But two things I am sure of. Whatever replaces the FRC will itself be replaced in the future – it is the nature of these things. And secondly, that the demand for the services of the profession will continue. Why? Because of the recognition of the quality of people that it attracts and creates.
Jamie Tomlin is chair of the LSCA’s technical committee
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