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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...

 

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Your comments:


Ian Jenkins

Sunday April 6, 2008, 10:33

Can auditors keep it simple in the face of increasing complexity? And will the framework, global finance, last much longer? (changing public expectations)

One speaker at the 2008 CA conference, themed 'Making sense of the future', holds professorships at both Harvard University and Harvard Business School. Harvard Business School is mentioned in the video interview with the chief executive of ICAS as one of the many partnerships the institute has recently developed. The interests of this speaker, Scot Niall Ferguson, include globalization and the interface between finance and politics.

Whether financial globalization can survive alongside local politics is indeed a challenging question.


Ian Jenkins

Tuesday May 6, 2008, 14:05

In his very welcome talk, John Griffith-Jones talked of many worries facing the profession.

"The key challenge - to governments and the capital markets - over the next 10 years is the creation of a respected international and independent organisation with the delegated authority to set standards and interpret and enforce them. I expect this to be every bit as challenging as agreeing the standards in the first place, but ultimately just as necessary."

However the cultural opposition to audit may slow progress. Luckily the Scottish Government is said to be investigating the Crerar report, in particular the very topical matter of why financial watchdogs didn't bark. An important matter because Arthur Andersen may have been a victim of this culture.


Tags:

aileen beattie | lecture | audit | kite mark | principles
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