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September 27, 2019

Alliance of accounting organisations finds multidisciplinary firm structure benefits audit quality

By Joe Pickard

A global alliance of accounting organisations has found firms that offer both audit and non-audit services are best positioned to deliver robust and reliable assurance.

A report published by Chartered Accountants Australia and New Zealand (CA ANZ), the Association of Chartered Certified Accountants (ACCA) and the International Federation of Accountants (IFAC) provides evidence that multidisciplinary firms in a large and corporate reporting system ‘fills a valuable market need’.

The report, Audit quality in a Multidisciplinary Firm also commented on how the rules that have developed over the past two decades mitigate the risks associated with audit firms providing non-audit services to some audit clients.

It noted that the multidisciplinary model is one of the best mechanisms to develop skills, expertise and consistency needed for quality audits.

The report drew its findings from leading academic literature, views of policy experts, and an in-depth study of how regulators worldwide manage risk.

However it highlighted that the narrower issue of providing non-audit services to audit clients is more nuanced. It stated: “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 ACCA’s executive director executive of governance Maggie McGhee 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.”

CA ANZ Reporting & Assurance Leader Amir Ghandar 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.”

IFAC CEO Kevin Dancey 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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