According to Pascal Jauffret, CEO of Forvis Mazars, firms are pivoting away from traditional auditing towards more lucrative consulting services. There is a shrinking number of firms with the scale, staff and resources for complex audits (particularly for public interest entities - PIE audits); and an influx of private equity cash may have an impact.

“The demand for large-scale, international audit is increasing – while the number of firms able to deliver it is narrowing,” he said. “That imbalance is becoming more visible for clients, particularly in highly regulated sectors.”

On private equity, Jauffret said: “Audit requires that you are absolutely independent from the other parties. So by definition, when you sell to a private equity [firm] that holds many, many other investments, you multiply the potential sources of conflict.”

As a senior leader at a large audit firm, Jauffret’s words carry weight, but he’s not the first person to raise concerns about auditor shortages. At the same time, there are plenty who argue that fears of an auditor shortage are unfounded.

Auditors from the UK and abroad have shared their views on whether Jauffret has a point.

Attractiveness of the profession

Hilde Blomme, Deputy CEO, Accountancy Europe, believes there is some truth to Jauffret’s words, though she says there’s a little more nuance to it. In many European countries, the total number of auditors is decreasing, says Blomme. In some jurisdictions there are more auditors retiring than there are new trainees joining the profession. “This trend does not make a distinction between PIE or non-PIE auditors,” she says.

There are ongoing campaigns to attract young employees, however, including a campaign launched by the International Federation of Accountants. Blomme says: “Overall, PIE firms are larger and often seen as more attractive [to potential recruits], so they might actually suffer less from a shortage.”

She endorses recruitment initiatives that focus on wellbeing, work-life balance, diversity and inclusion, supportive qualification pathways, and providing role models for young people.

ICAEW’s Evolution of Mid-Tier Accountancy Firms research reveals a shift in trainee trends that may attract more people to the profession at a younger age. Just under half (49%) of firms responding this year expected to increase the number of school leaver trainees, while 40% expected to decrease the number of graduate trainees. Factors influencing this trend include changes to national insurance contributions, apprenticeship funding and employee rights.

The PIE market is diversifying

Wendy Russell, Head of Audit at Grant Thornton UK, says that apparent shortages in the PIE market reflects the specialisation that it needs: “When we look at the PIE market, there is a finite pool of auditors, but this reflects the scale and capability required to perform these audits,” she argues. “Notwithstanding, there is scope for audit committees to be purposeful in selecting high-quality firms outside of the Big Four to deliver their audits, where those firms have the quality and competence to deliver.”

This difference in PIE audit numbers also reflects the fact that some firms and auditors choose to stick to the non-PIE audit market. Haines Watts is one such firm. “However, we have increasingly found that international groups, particularly with smaller UK presences, are willing to look outside the group auditor for UK audits,” says Martin Gurney, Director at Haines Watts.

This is increasing competition within the audit market with smaller firms taking on increasingly large and more complex audits, according to Chris Butt, UK Head of Audit at Azets. “Each auditor, however, has the ability to make their own decisions for taking on clients based on skillset and bandwidth,” he says. “So while the demand may have been there for a few years, it does not mean smaller audit firms have to put themselves under pressure to deliver outside of their risk appetite.”

Steve Neal, Head of Audit at Shaw Gibbs, says that while auditor recruitment has been a challenge since the COVID pandemic, there are signs that this is now easing. “Some of the larger firms are releasing staff, which will ease the market,” he says. However, he adds that many firms are taking on fewer trainees. “There are still plenty of audit firms, but we can’t do the audit work if we don’t have the people available to do the work.”

AI will likely make audit more efficient – and appealing

AI is going to play a huge role at audit firms. Neal says: “Without doubt, AI will be able to do some of the heavy lifting and this will make the audit sector more interesting in the early part of one’s career. That might, in turn, impact recruitment and retention positively.” 

Gurney says that AI-powered audit-data processing boosts efficiency and is capable of compliance-based activity. “But it is not sufficiently robust to handle more subjective or contextualised processes,” he says. “So it cannot replace that aspect of auditing.”

Meanwhile, Butt argues that the impact of AI on audit is “ongoing”, with a number of tools altering the ways in which audit work is undertaken. “But they can’t replace the human judgement that needs to sit behind every opinion,” he says.

Private equity won’t dilute audit

Despite Jauffret’s concerns about private equity firms and the auditor shortage, not all auditors agree.

“The requirements for audit haven’t changed significantly and private equity being involved hasn’t changed the demand for audit with the number of companies who need an audit unaffected by the ownership of audit firms,” says Butt.

He explains that private equity investment has enabled Azets to invest in people at every level and every service line, as well as invest in the technology needed to prepare for the future.

Neal says: “I don’t believe there are fewer audit people as a result of consolidation in the market. There will be fewer audit firms, but those firms will have greater buying power for AI. They should be able to provide a better service to audit clients.”