Can auditors really keep it simple?
2 Apr 08
KPMG's John Griffith-Jones is arguing for an audit "kite mark" that everyone can understand. It's a tough challenge, but worth attempting.
I've been on the move this week, first to London to see KPMG's chairman and senior partner John Griffith-Jones give this year's Aileen Beattie memorial lecture. The lecture commemorates the contribution of Aileen Beattie, the Institute's former technical policy director, and Griffith-Jones's talk tackled an appropriate theme - what are the major challenges faciing the auditing profession and how can they be met?
Griffith-Jones said auditors must address, among other things:
* the increasing international convergence of standards (with the need to ensure those standards remain consistent);
* the changing shape of the economic world; and
* changing (and ever more demanding) public expectations.
What particularly stood out was his call for an audit report that can act as an identifiable "kite mark" that everyone can understand. In plain English, Griffith-Jones said the audit report should say simply: "these accounts are about right, unless the management have deliberately conspired to falsify them."
There are strong parallels with the "Principles not Rules" debate. Company reports and acounts, including the auditor's report, have become unwieldy and virtually unreadable, and Griffith-Jones is right to say that audit reports should convey a meaning beyond simply covering the auditor's back. None the less, reforming the system will be a long and hard task. There are strong cultural pressures, not to mention the threat of litigation, which have led to the rise and rise of "small print" in financial reporting.
Meanwhile, I'm now in Luxembourg to meet with some of the CAs here. This is a leading financial centre and very signficant for ICAS, as the first location outside the UK to start training ICAS students. More on this in my next blog...