‘I don't want an auditor who is dynamic and creative. I want somebody I can trust’
27 January 2021: A senior risk manager for a financial services firm – on condition of anonymity – told us what he really thinks about the state of audit, as part of a series of articles based on ICAEW’s Audit Manifesto themes.
The risk manager we spoke to is not shy about his opinions of audit and will often tell auditors what he thinks in private. In public, he is willing to share his thoughts off the record, but also feels that they should be shared more widely.
He believes that there’s a lot for the audit profession to be proud of – the vast majority of audits go extremely well. “I don't think we should beat ourselves up as a profession. We should do a better job of communicating the thousands of audits that go well. In public conversations, people have said to me: what's the point of audit? It takes me five minutes to demolish that argument. Look around your office: if nobody's going to check anything independently, what sort of numbers do you think are going to end up in your accounts?”
When something does go wrong, the audit profession should also think about how it speaks to the public around the issues, the risk manager believes. “The first reaction is to explain why there isn’t really a problem,” he says “If your stock in trade is trust, when something goes wrong there has to be some kind of statement which admits the outcome is wrong. You can then go on and say: ‘we conducted the audit in accordance with auditing standards and we followed all the correct procedures’. But you have to admit that the result is not good.”
Part of the problem, he says, is that the focus in general has shifted too far away from audit as a critical service provided by firms and more onto consultancy services, which are seen as more valuable. Perhaps, he argues, the profession has become too interesting, to its detriment. “I don't want an auditor who is dynamic and creative. I want somebody I can trust.”
Auditors, it seems, agree. He recalls a time when he spoke to his auditor about the idea of operational separation. The auditor was from a Big Four firm (as a large financial services firm, the Big Four are seen as the only option). To his surprise, the auditor in question welcomed the idea.
“She said: it's going to make my job so much easier because all of the people working in my team will have chosen to work in audit, and don’t see it as a stepping stone to becoming a management consultant.”
More focus needs to be put on the value of audit itself, he says. If you took audit away, it would be missed. If firms stopped offering audit services, someone else would come in and fill the gap.
“You need somebody who is independent, assesses your accounts, expresses an opinion on whether it looks okay to them and confirms that they haven’t seen anything in the accounts that set off alarm bells. I think, if we approach it from that perspective, then we've got a very valuable service.”
So how would he like audit to change? “Go back to basics”, he says. New regulation may complicate matters. “Going back to the basics means looking at their business model when it comes to audit and refocusing on what it’s for.”