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Article

Reforming audit in the public interest

16 March 2020

We welcome the publication of the Auditing with Accountability report... The report makes a strong case for reform of the audit industry...

There is a real human cost when audit fails... The decisions made based on financial audits affect us all, through our pensions or savings, or as customers or suppliers of companies...

All of the major professional services firms have been accused of facilitating a range of illegal and unethical practices including tax evasion, money-laundering, and state capture. Accountancy appears to have become compromised through increasing conflicts of interest in the firms who carry it out...

Audit of major international companies is dominated by the “Big Four” accounting firms: Deloitte, EY, KPMG, and PwC... Although there are moves within the Big Four to stop offering audit and consulting services to the same client, we agree that audit quality for complex multinational corporations is unlikely to significantly improve if it continues to play second fiddle to the much more lucrative consulting practices within these global firms. Therefore, we support this report’s conclusion that structural and legal separation of audit from consulting is necessary...

Ultimately, this report demonstrates that there is an “accountability gap” around audit: the shortfall between what the wider public might legitimately expect auditors to do and what the audit process currently delivers...

The report’s call for civil society representation in key regulatory bodies and reform processes is vital to ensure that audit regulation benefits from public interest perspectives as much as the requirements of shareholders...

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