The government published it long-awaited proposals for auditing and accounting reform process on Thursday. Despite running to 232 pages there is much to criticise within it because almost none of the current issues in accounting and auditing that need to be addressed are tackled by the proposals made.

Specifically, as it admits, the audit regulator has in recent years found up to a third of audits carried out by the seven largest audit firms to be in need of improvement or significant improvement.

The entire focus of this review should have, in that case, been on the inability of these firms to do the task that they claim to undertake on behalf of society, and which lets them earn exceptional profits.

But it isn’t; in particular it fails to recognise the significant degeneration in the auditing process which has taken place over the past 30 years and is clearly written by commentators – and endorsed by ministers – who have little understanding of a time when auditing and auditors were held to a much higher standard of care.

Take for example the proposal for “a new duty on auditors to take a wider range of information into account in reaching audit judgements, in particular whether financial statements give a “true and fair view”.

New? It was ever the case that responsible auditors would do exactly that, until the box-ticking approach that has prevailed in recent years.

The simple fact is that these reforms were meant to deliver fundamental change; it is very apparent already that they do not. The partners in the big-4 firms must be delighted that they have got off so lightly. A little light reorganisation and the publication of a little extra data is a tiny price to pay for keeping the status quo intact. A lucrative seat on the Board of a top-tier firm when they leave government now beckons for ministers who instead should be ashamed to have put their names to these proposals.

Noel Guilford

 

PS The proposals are in the form of a consultation document with responses called for by 8 July 2021; I will be responding in due course and will publish my response on my website.