Audit reform will fail without fundamental overhaul, warns ICAEW
4 Dec 2020
ICAEW has published a manifesto setting out its vision for the future of audit, saying the success of any changes to firm structure and regulation depends on a clearer understanding of the role and purpose of audit
4 Dec 2020
The move comes in the wake of the three damning reports into the effectiveness, competitiveness and independence of audit by Sir John Kingman, the Competition and Markets Authority (CMA) and Sir Donald Brydon.
A number of Kingman’s recommendations have already been taken forward by the audit regulator, the Financial Reporting Council (FRC), but making audit fit for the future will require action from the regulator, government and the profession, ICAEW said.
The government also needs to publish draft legislation to amend the Companies Act 2006 extending the scope of audit and to finalise plans to give the FRC greater statutory powers to fine and regulate the profession, all measures mooted in response to the three audit reviews and a raft of corporate audit failures.
The professional body said the manifesto, which lists five principles to be put at the heart of any reform, was an opportunity for auditors to take full and appropriate responsibility for modernising their profession, re-affirming the centrality of acting in the public interest and enhancing trust in the audit process and in business generally.
The five principles are defined as:
• purpose: to articulate, uphold and communicate the profession’s social and economic purpose;
• identity: to develop and promote the distinctive identity of the audit professional;
• community: to foster a collaborative learning community for the professional practice of audit;
• education: to support holistic professional formation and education; and
• mindset: to adopt a design mindset to think and work differently.
Michael Izza, ICAEW chief executive, said: ‘It’s vital that audit evolves to meet the needs of the future, and we all have a responsibility to reshape and rebuild the modern profession.
‘By taking the initiative, auditors can enhance trust in business – and in the audit product itself.’
The manifesto is based on discussions and research with over 1,000 people from inside and outside the profession, held as part of ICAEW’s AuditFutures initiative, which was started to promote collaboration and to consider the challenges facing auditors.
Next year, ICAEW says it will seek feedback and participation from business, civil society, policymakers and from other professions as part of an engagement campaign based on the manifesto.
By Pat Sweet, additional reporting Sara White