58
5
8 opinion
Ian w elch
HeAd OF POLiCy, AssOCiAtiOn OF CHArtered CertiFied ACCOuntAnts
ACCA and the financial audit
he role of audit is under
t
heightened scrutiny. the un-
precedented global financial
upheaval of the past two years
has seen many commentators
questioning the value of audit.
And while attention has naturally
been focused on the large audit firms,
whose clients are banks and other major
financial institutions, there are also im-
portant issues at the smaller end of the
audit market. in many countries busi-
t
nesses below a certain size no longer
e
s
.
n
have a statutory audit, which means that t
o
o
auditors need to demonstrate the value
h
they bring to businesses in those sectors.
i
t
a
l
P
the Association of Chartered
i
g
D
Certified Accountants (ACCA) believes
e
r
e
that against this backdrop of change, it is
vital for the accountancy profession to re-
n
| F
h
examine the role of audit and to question
j
o
l
e
whether a sufficiently strong case is being
i
k
e
put forward for the benefits that audit can
provide to businesses, the economy and
l
l
e M
e
society. e W firmly believe that audit has i
c
h
a key role to play as a source of public
M
confidence in financial reporting but note that there is currently little heed to the needs of a wider circle of stakeholders than simply current
published research which seeks to demonstrate the value of audit in and future investors, and hence meet better the demands of the market.
promoting business trust. this, we believe, will be achieved by extending the scope of the
ACCA is seeking to change this situation by holding high-level audit from giving an opinion on financial statements alone to engaging
roundtable events on the future direction of audit in several markets, on issues such as risk management, the effectiveness of corporate gov-
and we put forward the following agenda as a contribution to the on- ernance, and testing the assumptions around an organisation’s busi-
going debate. ness model and its likely sustainability.
Firstly, while we reject claims from those critics who argue that Many experts believe that communications with boards include
the audit model is broken, we propose that the profession should de- commentary in this area anyway, so why not make it official and open?
velop approaches in respect of larger entity audits which pay more It should not be forgotten that audit firms regularly take on such a
role when auditing public sector bodies, where they report not just on
the financial statements also cover corporate governance. Of course
sophisticated, complex business models in large global companies
create challenges for auditors, and any expansion of the auditor role
would mean that the liability issue has to be addressed. But a way can
and must be found to do this.
At the smaller end of the market, a continued drive should be
made to establish services directly relevant to small businesses. new
forms of assurance will continue to emerge, some driven by regulation
and others by market demands. ‘unbundling’ the audit product from
its lengthy checklists, where appropriate, could be a key to provid-
ing confidence in areas of particular concern or risk according to the
needs of the individual company.
But the underlying essentials of assurance, that of bringing an
independent and quizzical assessment of a business, will continue to
add value to sMes as they emerge from the economic downturn and
help provide confidence in obtaining access to finance. Audit-type
skills are intrinsic to the training of a professional accountant, provid-
ing insight and experience of business models and engendering values
of professional scepticism and independence of thought which enable
accountants to advise businesses well.
the profession can best face down the sceptics by being bold,
progressive and establishing innovative assurance offerings which
meet the needs of businesses, stakeholders and wider society.
March 2010
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