• Register
Return to: Home > News > Regulation > Stakeholders far removed from the audit process most likely to call for change

Stakeholders far removed from the audit process most likely to call for change

There is a relationship between the level of involvement that financial stakeholders have with the audit process and their overall confidence in audit, a research has found.

The research entitled, Improving Confidence in the Value of Audit, carried out by YouGov for the UK Financial Reporting Council (FRC), has highlighted three categories of stakeholders based on their level of confidence in audit: the high confidence stakeholder groups, the medium confidence stakeholder groups and the low confidence stakeholder groups.

The research concluded that stakeholders closely involved with an audit show a high level of confidence in the audit process, and they are the least likely to advocate structural reform. Those stakeholders include for example financial directors, audit firms and accounting bodies.

For this group the main issue affecting their confidence in the audit process is the dominance of the Big Four which they say stifles innovation. The research states that these stakeholders believe confidence can be improved "through a more competitive and dynamic market rather than policy intervention".

The second group includes the stakeholders who are not directly involved in the audit process but have a direct interest in its outputs, for example regulators, investors, accounting bodies and politicians. These show a medium level of confidence in the audit and are likely to ask for structural change such as mandatory audit rotation and capping of non audit fees.

"This group differs from the high confidence group in that they see the current independence of auditors as a significant issue, which is exacerbated by the dominance of the Big Four," the research states. For these stakeholders the solution for greater confidence in audit comes from policy interventions to tackle transparency and independence.

Finally, the third group is constituted of stakeholders who are not directly involved in the audit process such as journalists or academics but also some investors. They show a very low level of confidence towards audit and are the more likely to ask for structural change to the audit process. Like the stakeholders in the medium confidence group they believe that the main issue affecting audit confidence is the current market configuration which prevents "true independence".

But unlike the stakeholders from the other two groups they advocate large scale structural change to the audit process. Arguing that a rethink of "how audit can best deliver benefit to society and key stakeholders is necessary".

The research based its findings on interviews with 36 stakeholders covering politicians, regulators, investors, associations, journalists, academics, NGOs, audit committee chairs, commissioners of audit, auditors and accounting bodies.

Related link:

Improving Confidence in the Value of Audit

Top Content

    ARGA team, assemble!

    The new top team has been named that will see in root-and-branch reform at the Financial Reporting Council (FRC) as it transforms into the Audit, Reporting and Governance Authority (ARGA). Will the new duo be as dynamic as some are hoping? Robin Amlôt reports.

    read more

    FASB: a quest for simpler standards

    FASB chair Russell Golden addressed the IMA 2019 Annual Conference and Expo at the Sheraton San Diego Hotel and Marina, California, on 18 June. IMA immediate former chair-emeritus Alex Eng acted as moderator. Joe Pickard reports.

    read more

    The future of audit, and how to get there

    Two recent reports peer into the future of the audit profession. One analyses what an audit should offer, while the other looks at how the audit process will be carried out. Robin Amlôt takes a closer look at both.

    read more

    EFAA elects new president, focuses on digital future

    EFAA’s new president, Salvador Marin, outlined his key priorities for the next two years at the organisation’s 2019 annual general meeting, while outgoing president Bodo Richardt offered advice. Robin Amlôt reports.

    read more
Privacy Policy

We have updated our privacy policy. In the latest update it explains what cookies are and how we use them on our site. To learn more about cookies and their benefits, please view our privacy policy. Please be aware that parts of this site will not function correctly if you disable cookies. By continuing to use this site, you consent to our use of cookies in accordance with our privacy policy unless you have disabled them.