Brydon calls for the audit bar to be raised
18 February 2020: Sir Donald Brydon has used a speech at ICAEW headquarters to call for the role of auditors to be significantly elevated; a change which he believes will improve the profession from top to bottom.
Speaking at Chartered Accountants Hall, Brydon outlined his vision for the future of audit and took questions from ICAEW members on a range of different aspects from his speech and report.
Brydon stated that the role of the auditor should go far beyond that of compliance checker, and called on the “Sparticuses of audit” to stand forward and say ‘I’ll do it’ when it comes to reforming the profession.
Commissioned by the government to write an independent report into the quality and effectiveness of Public Interest Entity audit, on 18 December 2019 Brydon published a 138-page report that makes a total of 64 recommendations on how not only improve audit but to redefine it.
Chief among the report’s recommendations is the creation of a ‘standalone audit profession’ supervised by the successor body to the Financial Reporting Council - the Audit, Reporting and Governance Authority (ARGA) – an endeavour in which Brydon believes bodies such as ICAEW should play a leading role.
In his speech, Brydon stated that he believes this new audit profession will provide a “clear sense of purpose”, leaving auditors “better equipped and emboldened to produce a more informative audit report to the company’s shareholders and other users”.
While the government and ARGA will decide which of the recommendations to take forward, Brydon stated that many of them did not need legislation or regulation and called on those involved in the audit process to seize the moment and act.
Brydon addressed the so-called ‘expectation gap’ between what is expected of audit and its current purpose and acknowledged that the main responsibility for a company’s success must remain with its directors. However, he went on to state that the central message he took from submissions for his report was the audit is currently “falling short” for a variety of reasons.
“Audit reports as they currently stand do provide information, and the amount of information provided has grown in recent years,” said Brydon, “but providing information and being informative are not necessarily the same thing.”
He went on to state that the core aim of his report is to “encourage and enable a more informative audit report” which provides “interesting and relevant” information.
“In doing so,” continued Brydon, “it seeks to elevate the role of auditor to a level that goes significantly beyond that of compliance checker.”
To achieve this, he called for the adoption of an “overarching purpose” of audit, to help determine whether confidence in a company, its directors and the information they communicate is deserved – something he believes should be enshrined in the Companies Act and something to which the auditor should have regard in carrying out their duties.
Brydon also called for reform of the language surrounding audit, stating that a “surprising ignorance” about what audit is chiefly stems from “a reflection of the extent to which audit has become estranged from its users by the arcane precision of much of its language”