Audit director at SH Landes LLP
“Both the Big Four and the challenger firms have concerns about the potential introduction of joint audits. The users of the audit services are also sceptical and wary of the expected higher audit fees. I believe that the benefits will outweigh the costs and will deliver more competition; uncompromised independence; better audit quality and robust challenge; smooth rotation.
“On the question of Public Interest Entities (PIEs) – after Brexit, the UK must adopt its own definition. There are currently large, unlisted private groups that fall outside of the PIE regime. Some of the current small PIEs (investment trusts, venture capital trusts, mutual insurers, branches of foreign banks) pose no systemic risk to the general public and such classification pushes away small audit firms, leaving these PIEs to be audited by the major firms, driving up the cost of their statutory audits.
“In terms of auditing standards and audit quality, there should be no difference between PIEs and non-PIEs audits. IFAC has issued practical guidance for audits of small and mediumsized entities and the audit software providers have developed separate packages for audit of small entities, groups and PIEs."
“Contracting is over because public bodies can never know enough about their partners’ business. Capita has simply grown too big and too complicated.”
Institute for Government
“Government should conduct a proper review of the capitalisation of the [outsourcing] industry and of the margins it offers. This should be part of a wider review about what can be outsourced and what should be kept in state hands.
“That review will expose in turn one weakness of the debate — that the quality of available data on the contracts is abysmal. Government and companies could both remedy this.”
Head of tax research and professor of practice in international political economy, City, University of London
“An audit, in UK company law, is an appraisal as to whether the entity has sufficient capital available to it to meet its obligations as they fall due. It is future looking, and the obligation is to all who might have a claim on the entity and not just the suppliers of capital. That is just about the polar opposite of what IFRS says. An auditor has this obligation for each and every subsidiary of a group that it audits.
“The audit question to ask then, is whether management can make this forecast for every group entity? That question can always be answered. The fact might be that management cannot undertake such appraisals. Then the auditor must say so. But that’s not an audit failure. That’s an audit success.
“Audit has to ask the right questions. And be willing to give the right answers. But it’s not doing either right now. And that is its problem.”
Chairman and senior partner, KPMG, in an interview for economia magazine
“One of the real challenges we must consider is whether or not financial statements contain the relevant information users need to make informed judgements. We have to guard against the misconception that an audit can be a crystal ball.”
Technology correspondent, Sky
“As the Institute for Government reported recently, the so-called strategic suppliers – G4S, Capita, Serco and the like – are hoovering up government contracts. In 2013, the 24 biggest suppliers received an eighth of all central government procurement spending. As of 2017, they were awarded a fifth. Since the turn of the century, these large outsourcing firms have taken over so many of the core activities of the state that they constitute a kind of shadow state.”
An economist, commenting on the SNC-Lavalin affair where a successful prosecution against the company could have resulted in the loss of 9,000 jobs
“If you are a company that is too big to fail then you should probably be publicly owned.”
Rachel Reeves MP
Chair of the Business, Energy and Industrial Strategy Committee
“A series of corporate failures at businesses such as BHS, Carillion and Patisserie Valerie have highlighted glaring weaknesses in audit. The overwhelming market dominance of the Big Four also raises serious competition concerns.”
Chartered accountant and owner of JO Forensic
“If an entity can prepare accounts, then those accounts can be audited, however big the entity. However, there seems to be concern about the audit of so-called Public Interest Entities and whether they need a special audit regime.
“Companies can have internal audits, but the concern is about the statutory audit in which an independent auditor is supposed to alert shareholders if the company’s accounts don’t show a true and fair view: that is, if there’s an appreciable risk that the accounts could be misinterpreted. Some think the objective of a statutory audit should be something other than this, but I disagree: shareholders of large or structurally important entities need this protection just as much as, if not more than, shareholders of other entities.
“I suspect the concern reflects uncertainty over whether shareholders of listed companies are capable of responding effectively if they receive a qualified audit report. The solution is to find ways for a company’s shareholders to organise. If that isn’t feasible, or doesn’t address the concern, one needs to ask if it’s appropriate to have private-sector shareholders.”
Head of audit at BDO
“It is not the role of an auditor to stop companies from going bust. But an auditor is responsible for spotting the warning signs so that management teams are spurred into making improvements and investors are able to make informed decisions.
“For every well publicised auditing failure, there are countless hidden examples of companies being pressed into making disclosures, write-downs and provisions due to effective auditor intervention. Professional scepticism needs to improve across auditing firms.
“Some stakeholders say the so-called ‘challenger’ firms don’t have the capability to audit large PIEs. This is nonsense. BDO’s recent appointments as the auditors of Halfords Plc and Galliford Try Plc is reflective of a broader shift in the competitive landscape of the FTSE 350 audit market, which is increasingly recognising that audit firm size is not a proxy for quality.
“It’s a matter for individual audit firms to determine which clients they can and can’t take on, weighing up issues including capacity and conflicts of interest. The challenge for us all is to scrutinise company accounts rigorously – and to demonstrate strength in dealing with management teams and audit committees where problems are identified.”