The Royal Society for Arts, Manufactures and Commerce (RSA) aims to confront the world’s big social challenges, which includes the future of work, how we might open up a wider array of opportunities for people to learn throughout their lives, how we might confront the climate emergency and, more crucially, how we can bring people with us. “We’re interested in big questions around how democracy can revive and flourish,” says Painter.
He believes that any professional field has to be anchored in its wider purpose. While economic and professional interests are vital components of that, it’s not the be-all and end-all, he says.
“Given the nature and scale of what we're collectively facing at the moment, we all, in our different fields and domains, have a responsibility to ask some of the bigger questions and what it might mean for us,” he says. “That's how I would frame the context in which I would see any discussion about the future of audit.”
The established objectives behind audit have been to provide a basis of trust and reassurance: that a picture presented of a commercial entity is something that resembles the reality. It’s an exceedingly important role, says Painter. People invest their pensions in companies and entities should be taxed in the right way.
“Taking that thinking about trust and transparency forward, it doesn't just have to be applied to financial information. It can be applied to environmental and social information.”
The question is around how that would link back into the way companies are governed, how they operate and the stakeholder experience. “Not just investors; the people that work for the companies who have contracts with it, supply it and the communities in which they operate.
“I think that the purpose of audit becomes a critical means of responding to those wider societal needs and communicating how a corporate entity is aligned with resolving some of those wider challenges. Auditors can ensure that the information provided is meaningful, so people get a sense of what is driving the entity beyond its commercial health.”
RSA promotes an approach to transformation that it calls the living change approach. It is, essentially, about holistic thinking: spotting opportunities to respond to major challenges within that big picture. “If I was to apply this to the audit profession, I would encourage auditors, representative bodies and the firms that employ them, to really think about that.”
Questions professionals should ask of themselves and their organisations include:
- What would constitute a healthy world, nation or community in which you feel you can contribute?
- What does good look like beyond compliance?
- What can we act upon now?
- What would an environmentally sound economy look like? How would it regenerate itself?
- How does this relate to technology, people, and places?
Those questions should be asked in the round, says Painter. They should play a part within the reflective moments in which companies find themselves periodically, for example, when compiling annual reports.
“I would say the audit profession might want to find mechanisms to continually ask those questions and suggest innovative responses that companies can reflect on and boards can consider as well as the whole corporate entity and its array of stakeholders.”
Going beyond compliance and into the environmental, social and financial health of an entity promotes the sustainability of the entity itself. External pressures are growing, and businesses that can demonstrate that they've embedded wider thinking into day-to-day practices will thrive over those that treat financial reporting and audit as a tick-box exercise.
Painter would like to see more collaboration across the profession. “The benefits are enormous. It's not collusion; it is a healthy discussion of the direction of travel for the profession. The Audit Manifesto is a significant contribution towards this. The question is where does it go next?”
A collaborative conversation between firms around wider purpose and how to drive greater change should be encouraged, he argues. It requires an open and authentic discussion. Collaboration should not just occur between firms either, but between firms and their clients, and the senior and junior members of the team.
“Unilever has decided that their suppliers should be paying a living wage,” says Painter, citing this as a good example of wider corporate collaboration. “This is a great move because it changes the relationship between them and their suppliers. They're saying that standards don't just matter in terms of Unilever as a corporate entity; they matter in the relationships it has with others. Entities and firms have power within the system to lever change.”
The audit profession is in a similar position to push through change on their terms, says Painter. But any discussions around this must not be dominated by larger firms or encourage a race to the bottom.
“There is a profession-wide conversation to be had that is linked to a broader public and commercial debate. I don't see there's any harm in that; in fact, it’s quite the opposite. I think it should be strongly encouraged. If institutions like the RSA can help pull together some of those common conversations and add an independent voice into the process, then all the better.”
Further reading:
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