This article was first published in the July 2018 UK edition of Accounting and Business magazine.

As the long summer stretches ahead and people rest their minds on far-off beaches, small groups will be working on that most pressing of problems: how to reform the audit world.

The Labour Party, under the veteran agitator professor Prem Sikka FCCA, is due to come up with proposals in time for its party conference in September. Sir John Kingman is also labouring away on his review of audit regulator the Financial Reporting Council, with a report due by the end of the year.

What’s more, a myriad of voices has harangued the auditing profession and its regulators since the collapse earlier this year of Carillion, the construction and outsourcing group of which the government was so fond. Spleens have been vented almost to destruction, and the amount of mud thrown at the Big Four in particular would keep the summer’s rock festivals in swampy camping business for years to come.

This is all good fun. But the summer break should allow for a bit of reflection and thought. None of the issues being discussed are remotely new. For example, once upon a time, what is now seen as the evil empire of the Big Four firms, bestriding the globe and keeping out competition, was a Big Eight posse. And the same arguments advanced now were advanced then.

Almost 40 years ago an intrepid investigative journalist in the US, Mark Stevens, wrote a coruscating account of the main US firms entitled The Big Eight: an incisive look behind the pinstripe curtain of the eight accounting firms whose practices affect the lives and pocketbooks of every American. And looking back at it now you can see those same concerns are being echoed today. ‘Auditing remains the foundation of the Big Eight’s practice,’ said Stevens. ‘It is the centre of the action – the land of big bucks. It is here that the Big Eight collect their highest fees, draw their greatest power, and gain entry into the hearts and minds of corporate executives, political leaders and bureaucrats. Big-league auditing is their private preserve, the one lush and lucrative business market that they alone control. The Big Eight have a lock and key on it.’

Mired in the past

The book goes on to detail many other concerns, all more or less identical to those raised today. And just as the same problems recur in our own times, the ways in which public bodies and politicians try to deal with them remain mired in the past and in the same old arguments. Critics find it much more gratifying to fling insults than seek solutions. MPs grandstand for the headlines. Select committee members shout at auditors that they wouldn’t hire them to audit the contents of their fridge. When the level of forensic inquiry has fallen this low, it is small wonder that nothing ever changes.

What is needed is a complete up-ending of the thinking. Everyone is trapped in a process that only seeks to detail what is wrong and to hurl abuse at those they see as culprits. Almost no one is starting from a position of what they would like the solution to look like and then working patiently back from that.

A good starting point would be to look at relationships and clarity of independence. That is where the real problem lies. The fundamental disjoint at the heart of the relationship between accounting firms and the business world is to blame. In reality, notwithstanding the efforts and legal responsibilities of audit committees and shareholders, the independent auditors are effectively paid by the companies that they are scrutinising. For this to work, everyone in the words of Lewis Carroll’s Through the Looking-Glass has to ‘believe in impossible things’. And in a world where nuance tends to be trumped by invective, that is harder than ever to achieve.

None of the much-touted mechanisms that in theory could create a new audit world – state-run auditors, insurance rather than assurance, shareholders taking serious control over the process, re-inventing a myriad of global audit firms – has ever shown any likelihood of gaining momentum and being brought to fruition. This summer’s thinking has to be about solutions, not pipedreams.

Robert Bruce is an accountancy commentator and journalist