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December 18, 2019updated 28 Jan 2021 9:19am

Brydon review: ARGA to act as a ‘midwife’ to create a new audit profession

By Joe Pickard

The Brydon Review, led by former London Stock Exchange Group chair Donald Brydon, has called for the establishment of a new corporate auditing profession to be established in its final report, Assess, assure and inform: improving audit quality and effectiveness, which would be supervised by the proposed Audit, Reporting and Governance Authority (ARGA).

The review, which was announced last year, has been eagerly awaited by many in the profession as one of its main aims was to look at the expectations gap in audit.

In the report, Brydon noted that while many people he spoke to over the course of his review referred to an ‘audit profession’ though no such profession formally exists; individuals acquire the status of statutory auditor through the accounting profession. He called for ‘much greater clarity about what an auditor is and to whom he or she owes a professional duty. Auditors need to be professionals in their own right, not just as part of another profession.’

Brydon wrote: ‘I recommend that ARGA acts as the midwife to create a new profession of corporate auditing, establishing the necessary professional body, to encompass today’s auditors and others with appropriate education and authorisation. ARGA would be the statutory supervisory body for that profession.’

Within a new profession of corporate auditing, Brydon called for subject specific auditors: ‘I recommend that an auditor’s authorisation to carry out audits in particular areas of activity should flow from tailored qualifications which they have achieved.’ He likened this system to a UK driving license which permits an individual to drive a certain amount of the fifteen possible classifications of vehicles.

Fraud

Brydon noted that out of all the topics covered in his report, he found that the question of fraud and auditors’ related responsibilities the most complex and noted the understandable ‘gap between the ‘reality and the expectations of auditors in this area’.

He recommended that ARGA amends ISA (UK) 240, the auditing standard dealing with fraud, to ‘make clear that it is the obligation of an auditor to detect material fraud in all reasonable ways’.

Brydon believes that the syllabus for the education of auditors is required to reflect this and has recommended that ‘training in both forensic accounting and fraud awareness be parts of the formal qualification and continuous learning process to practice as a financial statements auditor’.

As a way of supporting auditors in their detection of fraud, he has suggested that ‘ARGA maintains an open access case study register detailing corporate frauds in order that auditors can learn in real time from these frauds’.

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