Review finds that auditing should be a separate profession to accounting

January 22nd 2020 | Posted by Dave Cross

Review finds that auditing should be a separate profession to accounting

Review finds that auditing should be a separate profession to accounting

The world of auditing has been subject to a lot of criticism recently. Major firms like Carillion and Thomas Cook have collapsed with questions being asked as to why their financial issues were not recognised and addressed sooner.

As a result of the increasing levels of controversy, the government-backed a review led by Sir Donald Brydon. The results of this review have been released and they do not make pleasant reading for the auditing community, with significant changes recommended.

Brydon recommends separating auditing from the accounting profession

One of Brydon’s major recommendations is that auditing should be recognised as a standalone profession rather than being an add on to an accounting career. Currently, accountants can receive additional training and become auditors. Brydon’s recommendation is that this close link between the two roles is severed with them each becoming completely separate careers.

According to Brydon, standards of auditing could be improved by doing this. The role of an auditor would have its own required qualifications and standards.

Auditors facing serious criticism

The Brydon Report also contained damning criticism of companies including KPMG, Deloitte and PricewaterhouseCoopers. In the report, these companies are accused of putting profits ahead of the effective scrutiny of companies like Carillion.

In order to improve these standards, Brydon recommends several changes that should be made in the auditing world. These changes include:

  • The publication of profits made by accountancy firms for providing auditing services.
  • The disclosure of annual pay rates for senior auditors.
  • Training in forensic accounting for auditors.
  • Annual reports from auditors concerning the actions they have taken to detect and prevent fraud.

The overarching theme of the report is that there is a need for a significant amount of reform in the auditing arena. There are also references to the fact that the work of an auditor should reflect the interests of everyone who is involved with the survival of the company. This includes individuals who are employed by the company.

The future of the proposed reforms

The Brydon Report was published on 18 December 2019. There has been much talk about its implications. The required changes would certainly be significant if all of the recommendations are adopted.

The accounting watchdog has already started to take action when it comes to tackling issues with auditing services. It has introduced a ban on firms providing auditing clients with recruitment and remuneration services. This removes a potentially serious conflict of interest.

This action has been taken in advance of the implications of the Brydon Report. The recommendations contained within the report are expected to be taken forward in the form of a Government White Paper, in Spring 2020.

In summary

There is a serious lack of confidence in auditors that have arisen from the collapse of major companies. The Brydon Report seeks to address this lack of confidence by recommending a range of changes, including separating the auditing role from the accounting role altogether.

Only when the Government releases its White Paper will we know how far these recommendations have been taken into account. When this happens, it could be the start of a significant new direction for the auditing profession.

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