Before audit reform, should auditors first do more?
We have always been of the view that there is much more we can do on audit that delivers much more value. We want to deliver more value than the traditional piece.
But you are in some ways constrained by law because the law requires you to do something, which is why we need legislative changes. You are someway constrained by the liability environment you sit in because when you start straying outside of what you’re legally required to do, you can run into all sorts of issues with your insurers.
We have a system that is enshrined in law and standards that we’re obliged to follow at the moment, and we have very little attitude to go much beyond that.
Does change in audit start with legislation?
Yes, you won’t get a change in competition without regulatory change because the system’s against us. It needs Brydon to opine and then either legislative change or the new ARGA to have delegated authority to bring in changes on what we do and that would drive some changes, as there’s a lot of willingness.
Everyone I talk to seems to say this moment is different than the past. I keep saying it’s a once in a lifetime event because it’s not once in a decade, it’s once in a lifetime. In my lifetime in the profession I’ve never seen a moment like this.
My fear is the opportunity’s not taken and that will be because of weakness. The biggest risk I perceive is the changing in PM and whoever the new Secretary of State is, potentially that will delay it because they’ll want to see it and look at everything that’s going on, which could slow reform down.
If you delay it too long you end up pushing it into the long grass. And if you get somebody who’s anti-market intervention in that role, that could have an impact.
Having said that, we think that’s a risk but the energy, the political will, of so many people is still massive. Someone like Rachel Reeves isn’t going to let this go, Andrew Tyrie isn’t going to let it go and I think a big bulk of MPs are still really angry and that for me is the defining difference. It’s unlike Macfarlane where people said ‘yes, there is a problem’ but there was no political will to do anything about it.
At the moment, there is real political will.
What are you expecting to happen in the next few months?
A bit of a battle, I think.
We’ve got a primary plan because we still absolutely believe that the CMA did a fantastic evidence-based job. They went out and they looked at everything. Anyone who says they didn’t listen to us is wrong. They listened to us, they just didn’t like what they said and didn’t accept it which is a different thing.
We think the remedies that CMA have proposed are the best remedy and that’s what we’re primarily planning for and my expectation is that it will still come through. There may be a battle along the way.
The shared audit people, you know it’s a new idea that’s been touted around because they think that might distract people but folk will quickly come to realise it doesn’t answer the question and so they back away from that. So, we still think we’ll get joint audit.
The timetable, we talked to BEIS who are controlling the process and they were quite clear on their timetable to have recommendations by autumn, start writing the draft bill for it next year and realistically when we talk to them now, they will say well they hope to have the draft recommendations by the end of the year and the bill a bit later into 2020, but there’s obstacles along the way.
I would be massively disappointed if we didn’t get it in 2020 but originally, we were hoping it would be first half. Now it’s going to be towards the end of the second half. But, I still think that there is enough political will to drive through really significant change.
I think it’s untenable for change not to happen.
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