The audit profession and wider business community should work together towards a new ‘kitemark’ standard for audit reports, according to KPMG Europe co-chairman John Griffith-Jones.
Griffith-Jones’s comments were part of the Aileen Beattie Memorial Lecture ‘Towards an Even Better Profession’, which he delivered to the Institute of Chartered Accountants of Scotland recently. He stressed the need for a re-think of the role of public company audits and suggested the current expectation gap about the role of auditing could be closed in with a new approach.
“I believe the kitemark that the profession and society should agree to work towards could be summarised in the vernacular as ‘these accounts are about right unless the management have deliberately conspired to falsify them’. I am not about to argue for any reduction in the rigour with which an audit is carried out, I am not arguing for the commoditisation of an audit, and I am not proposing to take on liabilities I cannot meet,” he said.
The ‘kitemark’ would require individual auditors and firms to sign up to an increased level of responsibility, Griffith-Jones said. He added: “Society, for its part, would need to accept the standard of ‘about right’ as value for money and that – like it or not – there is not, as of now, sufficiently reliable audit technology to make it possible to remove the fraud caveat. Corporate scandals of recent years have taught us that we miss the point in spending a lot of time debating what ‘about right’ means. Because, in almost all the cases of major audit failure ‘about right’ does not come into it. The accounts turn out, with hindsight, to be ‘spectacularly wrong’. No amount of words in the auditor’s opinion will change that fact.”
Griffith-Jones said advantages of such a system would include a sharp focus on the weak link in the reporting supply chain, an opportunity for the profession and regulators to work collaboratively on technology and processes in this area, and a much clearer line of responsibility, and therefore blame, where things go wrong.