Is the time right for wholesale change in audit?
March 31, 2008
Prem Sikka’s argument that:
…the very model of company audits is flawed. It permits company directors to hire and remunerate auditors, albeit with shareholders rubber-stamping their decisions. Under the model, profit-seeking auditing firms are expected to regulate capitalist enterprises. As no one can make a profit without appeasing or accommodating clients, auditors can never be independent of the client companies or their directors.
is logically correct but will not lead to change any time soon unless there is a wholesale re-writing of the rule book under which auditors are appointed, remunerated and operate.
Prem’s argument is not new but perhaps he thinks the time is right to canvass for change? He believes the way the Audit Commission operates works better but does it? How often have we seen the Auditor General be critical of no less than HMRC and yet little changes.
Changes in the way auditors are appointed and remunerated only works if it leads to a higher quality standards. Yet as we already know from Francine McKenna, the problem is as much to do with audit firms’ technical ability to understand, parse and report upon complexity in an increasingly complex business environment. Simply changing the paymaster is not enough.
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