A global alliance of accounting organisations has found that firms that offer both audit and non-audit services are best positioned to deliver robust and reliable assurance.
The report published today by Chartered Accountants Australia and New Zealand (CA ANZ), the Association of Chartered Certified Accountants (ACCA) and the International Federation of Accountants (IFAC) provides compelling evidence that “the presence of multidisciplinary firms in a large and evolving corporate reporting system fills a valuable market need” and simultaneously commends how the rules that have evolved over the past two decades “mitigate risks associated with audit firms providing non-audit services to some audit clients.”
The report, Audit Quality in a Multidisciplinary Firm, draws its findings from leading academic literature, views of policy experts, and an in-depth study of how regulators worldwide manage risk. It is meant to contribute constructively to the international debate on the multidisciplinary firm business model and auditors providing non-audit services.
The report notes that high quality audits require “a diverse skill base” and that “the multidisciplinary model is one of the best mechanisms to develop the skills, expertise and consistency needed for quality audits.”
The narrower issue of providing non-audit services to audit clients is more nuanced. The report notes, “There continues to be concern that independence is compromised in doing so, in spite of strict rules that prohibit or restrict firms from providing such services to audit clients.
“Services that are permitted quite often are complementary to the audit, and threats to independence can be effectively mitigated. However, demonstrating to the public that perceived conflicts of interest are being appropriately managed is challenging.”
The report continues: “As this issue continues to be considered, it is important to remember that evidence cited in this paper calls into question the need for sweeping regulatory changes that could have unintended consequences on audit quality” and notes that “the vast majority of non-audit fees actually come from clients for whom firms do not provide audit services.”
Maggie McGhee, executive director – governance, at ACCA, said:
“We welcome a robust debate on these issues that no doubt will continue to be important for the profession and policy makers, and encourage a conversation grounded on the facts.
“ACCA is delighted to publish this report with our colleagues from CA ANZ and IFAC. It is the latest example of the benefits which our alliance creates for our members and our students, as well as for the accountancy profession and the public interest.”
Amir Ghandar, CA ANZ Reporting & Assurance Leader, said:
“The multidisciplinary base of auditing firms is a strength that contributes to audit quality, but firms and the profession at large must continue to actively establish and demonstrate a culture of integrity through governance, transparency, and our core ethics.
“Robust independence rules have evolved over the past two decades to mitigate real or perceived risks of conflict of interest associated with audit firms providing non-audit services, and these should continue to evolve in order to keep pace with public expectations and emerging challenges.”
Kevin Dancey, IFAC CEO, said:
“Questions about audit quality, independence, and competition are always worth asking. But no one should rush to conclusions. The business case for the multidisciplinary model is strong and there is significant evidence in support of the model.
“Let’s work with the facts as we continue to best serve the public interest.”
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About CA ANZ
Chartered Accountants Australia and New Zealand (CA ANZ) is a professional body comprised of over 120,000 diverse, talented and financially astute members who utilise their skills every day to make a difference for businesses the world over.
Members are known for their professional integrity, principled judgment, financial discipline and a forward-looking approach to business which contributes to the prosperity of our nations.
We focus on the education and lifelong learning of our members, and engage in advocacy and thought leadership in areas of public interest that impact the economy and domestic and international markets.
ACCA (the Association of Chartered Certified Accountants) is the global body for professional accountants, offering business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management.
ACCA supports its 219,000 members and 527,000 students (including affiliates) in 179 countries, helping them to develop successful careers in accounting and business, with the skills required by employers. ACCA works through a network of 110 offices and centres and 7,571 Approved Employers worldwide, and 328 approved learning providers who provide high standards of learning and development.
Through its public interest remit, ACCA promotes appropriate regulation of accounting and conducts relevant research to ensure accountancy continues to grow in reputation and influence.
ACCA has introduced major innovations to its flagship qualification to ensure its members and future members continue to be the most valued, up to date and sought-after accountancy professionals globally.
Founded in 1904, ACCA has consistently held unique core values: opportunity, diversity, innovation, integrity and accountability. More information is here: www.accaglobal.com
IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of more than 175 members and associates in more than 130 countries and jurisdictions, representing almost 3 million accountants in public practice, education, government service, industry, and commerce.