24th May 2010:

I welcome….

… the contribution to the ‘Role of the Audit’ debate by an investor – the well respected Guy Jubb of Standard Life in the UK.  His considered article in the UK’s Accountancy Age is worth a read.  www.accountancyage.com/accountancyage/comment/2263349/viva-la-audit-revolution  
 
My main concern is Guy’s apparent focus on the form and content of the audit report – albeit this does reflect the form and content of the audit.  At present, audit reports are, of necessity, ‘boiler plate’ as most regulators mandate the form and content of the audit report and any such report that is ‘out of the ordinary’ tends to raise concerns rather than give any comfort that the audit report reflects the circumstances of the particular company.
 
I agree with Guy, however, that ‘…the momentum for audit change is building irreversibly…’ and I hope this is supported not only by regulators and investors but also by auditors.
 
We need to be careful however to remember that the financial statements, and related disclosures, are those of management and that auditors are required to express a view on them.  A parallel system whereby auditors disclosed views different to those of management, or in addition to those of management, could be confusing.  Indeed, the strength of the current system is that the threat of a non-standard audit report usually prompts management to amend the offending accounting treatment or disclosure – thereby ensuring a ‘boiler plate’ audit report.  I would regard this as a positive outcome – even if the audit report is somewhat less exciting.

 Global Accounting  Standards & Regulators  0 Comments May 24th, 2010