the UK have led to insufficient audit work for small firms, which
affects their ability to train junior staff, according to a report
from the UK Professional Oversight Board (POB).
This is due to trainees and audit staff not gaining enough audit
experience to qualify as an auditor or maintain competence at a
reasonable cost once qualified.
This was one of seven conclusions drawn from the board’s
Report on Practical Training for Auditors. The review
involved all aspects of practical training, including the approval
and monitoring of training at firms.
It was conducted by a research team from the University of
Glamorgan in Wales and is particularly relevant as the audit
exemption threshold in the UK recently rose from companies with a
turnover of up to £5.6 million ($8.6 million) to those with a
turnover of £6.5 million. Companies with balance sheet totals of up
to £3.5 million are now also exempt, rising from £2.8 million under
the previous regime.
Barrons, an Essex-based three-partner firm, has been affected by
threshold rises. Audit and accountancy services manager Russell
Tillbrook says that audit work and practical hours have been much
harder to come by for the firm since the previous audit exemption
threshold increase in 2004, when turnover and balance sheet totals
rose to £5.6 million and £2.8 million, respectively.
“That probably took a lot more clients out of audit than you
will find with a jump of £5.6 million to £6.5 million,” he said,
adding that he estimates the firm lost about a third of its audit
clientele at that point.
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By GlobalDataTillbrook said he agrees with the report’s findings that the
rise in thresholds has made it more difficult to offer junior staff
practical experience.
“We’ve found that the people who have come in have got less
exposure to audit work than previously, and this is probably due to
the issues that there are less audits about now,” Tillbrook said,
adding that the firm typically recruits talent with a year of
experience.
“That means that if we take them out of audit, we have to
instruct them from scratch and train them on the basics of auditing
techniques,” he said.
The POB report found the drop in audit work could also
potentially affect large firms. It suggested audit trainees in
large firms often favour a career path other than audit and that
larger firms rely on trained auditors from smaller firms to fill
any gaps.
However, mid-tier firms The Accountant approached said
audit thresholds were not depleting their talent pools and that
recruitment challenges stemmed more from poaching by the private
sector.
PKF UK head of audit Richard Bint said it has been difficult to
recruit and retain qualified auditors but there is no shortage of
people wanting to train as an auditor.
He noted that banks have been “hoovering up” large numbers of
qualified people but presumably “now they are spitting them out
again at an equally fast rate”.
The next stage of the POB review will be establishing a working
group to identify, assess and prioritise possible actions.
Arvind Hickman and Carolyn Canham
