AUDIT QUALITY: HOW MUCH OF A CHALLENGE IS IT?

In June 2021, the Financial Reporting Council (FRC) will host a conference on the culture of challenge, entitled “Audit firm culture: Challenge. Trust. Transformation”

David Rule, the FRC’s executive director of supervision, has said: “Robust, focused and independent challenge is vital to a high-quality audit..” and “It should be front of mind for audit teams as they advance their planning for December 2020 year-end audits.”

Whilst delivering audits can be taught according to methodology, how is this ‘challenge’ mentality highlighted by the FRC taught? (see the full article at, https://www.frc.org.uk/news/december-2020/frc-highlights-importance-of-a-challenge-culture-i )

During my life time, large events have shaped the audit industry such as the Enron scandal (2001), the financial crisis (2008), collapses of other large businesses such as Carillion and the most recent is covid-19 and the pandemic resulting in the recession of 2020. This year, businesses have experienced ‘prolonged uncertainty and operational challenges’ and the FRC highlights that it is therefore important to audit these businesses correctly.

As an ex-BIG4 auditor, I have seen the scrutiny of audit quality reviews (AQR's) and the importance placed on audit quality at all levels down from the partners. The issue of audit quality will never go away, and rightfully so.

But, is there a ‘challenge culture’ failure? The FRC says there is. If there is, why is that? Is it to do with relationships between audit firms and clients being too familiar? Is it because some auditors are afraid to challenge where there is opposition? Is it because auditors are not confident enough in the work they are doing, that they therefore can’t challenge? Is it because audit firms are not staffed appropriately? There is lots of discussion to be had at the conference in June.

I have to say, training as an auditor, is a fantastic grounding for a career - if you are led by the right people. Outside of the profession, I think people view auditors as ‘dull accountants’ but there is an enormous amount of soft skills and important characteristics needed to be a competent and very good ‘quality’ auditor. It’s not a job for the timid. In your first audit engagements, associates (graduates) should be presenting work for review at a high standard and often, that means questions need to be asked of the client for answers.

Whilst many days in client offices were for 10-12 hours, the audit room is a fantastic place of discussion. In my experience, it’s quite a loud room of discussions to make sense of accounts and the underlying reasons. Indeed, the recruitment process involves assessment days and intense question rounds, to figure out who the team players are and those who show initiative, because this is crucial for a high-quality auditor.

Going back to the reasons why there might be a challenge culture ‘issue’, could it be the long long hours of work due to the increased regulation in the profession as a result of the above mentioned high profile cases? Are some auditors becoming tired or lazy?

Tired or lazy? Surely not. Perseverance, resilience, determination, initiative, integrity and collaboration. These are some characteristics any high-quality auditor should possess. Being an auditor and working in practice is one of the best careers you can have and you will always develop as you progress.

Craig M. McKellar