ICAS has issued its Corporate Auditor report, setting out how Sir Donald Brydon’s recommendation to establish a Corporate Auditor profession could be implemented in practice.
ICAS notes with interest the intention of BEIS, as proposed in its consultation paper ‘Restoring trust in audit and corporate governance’ (March 2021), to take forward the recommendation by Sir Donald Brydon (December 2019) to establish a separate Corporate Auditor profession. ICAS recognised this was a far-reaching proposal which merited further work and therefore established a working group in 2020 that focused on how it could be implemented. The working group included senior members of the audit profession from large firms along with representatives from industry and academia.
The sequencing of actions envisaged in the working group’s paper – A roadmap to the Corporate Auditor profession – is different in some respects to the proposals in the government’s consultation paper. However, the working group considers the end result would be the same: a Corporate Auditing profession that produces high-quality audit and assurance of both financial and non-financial information, and that this would be an attractive career choice for exceptional talent in the years to come.
The approach suggested by ICAS seeks to adopt the build back better mantra and to leverage and further enhance the architecture that the UK professional accountancy bodies already have in place, rather than seeking to establish a separate professional body from the outset. Establishing a new profession is not an easy task and certainly not one that can be achieved overnight. Additionally, most successful projects need to be broken into key stages. ICAS therefore sets out a three-phase approach which it believes provides a clear roadmap to enable Sir Donald’s recommendation to be implemented in practice.
Phase 1 – Improving the current financial statement auditor regime
Phase 1 focuses on the current financial statements’ auditor and suggests improvements that could be made to the existing framework to enhance audit quality and reputation of, and trust in, auditors of financial statements. This includes the introduction of a new advanced assessment of audit skills and regular checks of competence post-qualification.
Phase 2 – Providing assurance qualification(s) to non-financial statement auditors
Phase 2 focuses on how to equip non-financial statement subject matter experts who would wish to carry out assurance work with applicable skills in assurance and related matters to enable them to undertake assurance engagements in their respective areas of expertise. This would ensure that they are equipped to carry out such assurance work in accordance with an internationally recognised assurance framework as well as (potentially) to be better able to assist in an audit of financial statements.
This phase could be accomplished by the extension of the education, qualification and regulation of the current accountancy professional bodies to embrace the wider remit of a Corporate Auditor.
Phase 3 – The Corporate Auditor professional body
Finally, phase 3, in time and if required or desired, would be to establish a new Corporate Auditor professional body that educates and qualifies those subject matter experts who wish to carry out assurance work in their areas of expertise. Phases 1 and 2 need not be undertaken sequentially and in fact there would be considerable benefit if they were to commence at the same time.
As a firm supporter of principles not rules, ICAS also advocates that the core principles for a Corporate Auditing profession should be:
- Auditing/assurance wherever applied is a specialist activity requiring high standards and skills consistently applied.
- Such skills can and should be acquired through a formal training programme provided by a recognised expert education establishment accompanied by appropriate practical experience.
- Successful completion of formal training in audit/assurance skills and processes would be attested by formal assessment and lead to the award of a new professional qualification of “Corporate Auditor” (Caud).
- The Caud qualification will be THE senior specialist qualification in audit that is allied to core subject matter skills such as: financial reporting, cyber security, environmental information and others. To qualify for work in the audit and assurance of specialist areas will require core skills in these areas in “addition to” the Caud qualification; the Caud qualification alone will not suffice.
- All Corporate Auditors will be subject to appropriate ethical and independence requirements.
- A Caud qualification will, once acquired, require continuous professional development (CPD) to ensure maintenance of skills and professional competence.
- The Caud qualification can, in the first instance, emanate from within the existing professional bodies that offer financial audit qualifications though may well in time sit within a new professional body.
The BEIS consultation closes on 8 July. ICAS will watch with interest how this proposal develops. When building a house one needs to build upon strong foundations; the proposed ICAS roadmap most certainly adopts that approach.