The effectiveness of the UK audit market has been under intense scrutiny since the collapse of Carillion with Sir John Kingman reviewing the performance of the Financial Reporting Council (FRC), the Capital Markets Authority conducting an inquiry into the audit sector and Sir Donald Brydon reviewing the purpose of audit. With the Secretary of State for Business Greg Clark announcing plans to replace the FRC with a new regulatory body called the Audit, Reporting and Governance Authority (ARGA), and calls for the Big Four professional services firms to be broken up, it seems as if the UK audit market is on the brink of the most significant shake up in its history.
This comes as little surprise as faith in the audit process has been rocked not just by Carillion, but by Patisserie Valerie and a number of other seeming failures. A poll carried out by ICSA and The Core Partnership at the start of the year showed that there was little faith among governance professionals that the audit process had improved since the Carillion collapse. Concerns were voiced about the closeness of the relationship between management and auditors; the conflict of interest inherent in providing the audit opinion and seeking reappointment as the auditor; management pushing audit firms on fees which reduces their ability to resource audits; and that the expectation gap between what auditors are required to do and what the public think they do.
With the world of audit such a hot topic, a panel discussion about the future of audit will take place on day one of the ICSA Annual Conference at 11.45am on 9 July. Join us then to find out what the future might hold for the UK audit market.