Little improvement in audit process since Carillion collapse

– A poll out today by ICSA: The Governance Institute and recruitment specialist The Core Partnership reveals that just 9% of company secretaries surveyed think that the audit process has improved since the collapse of Carillion. Over half (51%) feel that it has failed to advance with many believing that the industry has learned little from the collapse.

According to Peter Swabey, Policy and Research Director at ICSA: ‘Generally companies feel that it is too early to tell if things have improved to any great extent. What is clear from the results of our poll is that there is very little confidence that proposed changes to the audit regime will lead to improvements in the audit process.On a scale of one to ten, with ten being very confident and one not at all, the average response was a lowly four.’

Some of the concerns voiced about the current state of the audit process were as follows:

• Auditors have become lazier. Instead of sourcing their own documents and reconciling their work they have set up portals to collate documentation in a specific format and push it through an algorithm. This is more efficient from their side but their clients are forced to work harder: basically outsourcing their role to their clients
• There is an issue with management pushing audit firms on fees which reduces their ability to resource audits… an issue perhaps which needs to be monitored more closely by the Audit Committee when fees are agreed. Perhaps they need to ensure that audit firm is happy that they can provide an adequate audit for the fee agreed with management before ultimately agreeing the fee
• Still too close a relationship between management and auditors. Need to find a more appropriate balance between auditors being familiar with the company’s business and the ability to remain inscrutably independent
• Audit is not taken seriously by the big 4 firms; it is a loss leader and seen as a way to access better paying non-audit work
• The gap between what auditors are required to do and what the public think they do is large and needs to be addressed.