With the Competition and Markets Authority (CMA) scrutinising the Big Four, can we still trust auditors?
Yes – Michael Izza is chief executive of the ICAEW.
Every year, hundreds of thousands of audits are performed to the highest professional and ethical standards.
Auditors underpin business confidence by providing independent verification that a company’s financial statements are fair, balanced, and understandable. Chartered accountants are regulated to extremely high standards, facing serious sanction should they fall short – they must constantly demonstrate they’re worthy of trust.
However, public confidence in audit is under threat, owing to high-profile corporate failures. Lack of competition in the large listed audit market also fuels negative perceptions. We must address this, fast.
The main question we should be asking is whether audit still meets the needs of society. Emerging technology is already revolutionising audit – enabling auditors to spot fraud, for example.
But we should not allow the mistakes of a few to tarnish the excellent work undertaken by the majority of auditors in strengthening the UK and global economy.
No – Bill Esterson is the shadow minister for business and international trade.
The Carillion fiasco saw an abuse of public funds, appalling mismanagement of contracts, and mistreatment of workers and suppliers.
It is a mystery to most people how auditors did not highlight the shortcomings at Carillion, and that scandal is a prime example of why it is essential that we have a root and branch review of the audit system.
In order to rebuild public trust in audit, it is important to look at how the market operates.
A review by the CMA of the big four is an important aspect of rebuilding trust in auditing because of the sense that there is a conflict of interest which puts retaining clients ahead of robust investigation and reporting. The big four auditing firms have an overwhelming control of the audit market, which makes it very difficult for smaller firms to gain access to larger accounts.
It is quite right that the CMA investigate whether they operate in an anti-competitive manner as a cartel against their smaller competitors.