In the wide-ranging proposals for reform of the UK audit market, the government is proposing setting up a stand-alone professional body solely for auditors
This is part of the government’s overarching plan to create a new corporate auditor designation.
‘Corporate auditing, with a new ethos and wider scope, will require tomorrow’s auditors to include individuals with different skillsets,’ the BEIS consultation stated, adding that ‘a new professional body for auditors of all corporate information could also help to elevate the status of auditors and reinforce their ethical and public interest obligations’.
The government therefore proposes to put an appropriate framework in place to facilitate the establishment of a new professional body for external auditors of all types of corporate information, although there is no timetable for the creation of a new body.
Currently auditors have to be members of one of five professional bodies, including the ICAEW, ICAS, Chartered Accountants Ireland (CAI), the Association of Chartered Certified Accountants (ACCA) and the Association of International Accountants (AIA), the main training bodies for the audit profession.
The government thinking is that creating a separate professional body would strengthen the role of auditors and remove any potential conflicts although it appears that they would still train under the existing framework.
However, the objective of setting up a separate auditor body is not straightforward, something the government accepts. ‘Achieving a smooth transition from the current situation where only professional accountancy bodies are recognised to supervise and provide qualifications to auditors could therefore present significant challenges,’ the consultation stated. ‘Nonetheless, the government is currently attracted to the potential for this option to deliver a genuinely distinct, reformed and expanded audit profession.’
It does appear to have an open mind on whether a separate body is the right way forward, stating: ‘Accountancy bodies could begin to serve new entrants to the profession, as well as maintaining their role as providers of approved qualifications and as supervisory bodies in relation to statutory auditors.’
Under the current regulatory framework all auditors have to possess an audit qualification granted by one of the five professional accountancy bodies which are Recognised Qualifying Bodies (RQBs) and all auditors and firms have to be registered with one of the four Recognised Supervisory Bodies (RSBs).
The creation of a distinct professional body for auditors was initially proposed by Sir Donald Brydon in his 2018 review of the audit market. At the time he said: ‘I recommend that ARGA acts as the midwife to create a new profession of corporate auditing, establishing the necessary professional body, to encompass today’s auditors and others with appropriate education and authorisation. The [new] Audit Regulation and Governance Authority (ARGA) would be the statutory supervisory body for that profession.’
The Brydon Review also recommended that the regulator ensures education and training takes place consistently across the new corporate auditing profession, prioritising the development of a specific auditor qualification.
The consultation document states that the ‘government is of the view that creation of a new dedicated professional body would benefit statutory audit, and would be highly desirable if not essential for the development of wider audit’.
Commenting on the proposals, Maggie McGhee, executive director of ACCA, said: ‘Greater clarity is needed on what’s planned for the ‘new audit profession’ – and the basis on which it will enhance the profession. The government, ARGA, professional accountancy bodies and audit firms together have a critical role to play to ensure that the audit profession, however set up, remains attractive. It’s important to make sure that the valuable and transferable skills developed by people working in audit continue to be valued by wider business.
‘As a professional body that trains auditors, our audit and assurance exams offered as part of the Master’s level ACCA qualification deliver the technical skills and competencies needed and we will continue to evolve these as audit itself transforms. These are offered at two levels – compulsory for Audit and Assurance, and elective for Advance Audit and Assurance for those looking to specialise as auditors.’
The consultation closes for comment on 8 July 2021.