Auditors need to demonstrate to regulators,
government and the wider public the value they add, according to
new Institute of Chartered Accountants in England and Wales (ICAEW)
president Gerald Russell.

Russell, a senior partner at Ernst &
Young, began a year-long term as ICAEW president this week.

Speaking at the annual ICAEW president’s
lunch, Russell said auditors do not always articulate the value
they provide.

“We and our clients take it for granted. We
know what we’re doing, so we are trusted to just get on with the
job. As a result, I don’t believe the value that we add is
necessarily understood,” he explained.

Russell’s comments were based on recent
research by the ICAEW’s financial services faculty, which showed an
auditor’s discussion with management has enormous value to report
users but this value is not being captured by the audit report.

“To draw a parallel, the fire safety
compliance statement at the entrance of public buildings says very
little of the many steps that have to be taken to meet the required
level of compliance,” Russell said.

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“Thus, it may well be that we are at a point
where the audit report needs to say more in this regard. Mind you,
whether we actually want fire compliance statements to be the size
of the doorway one has to go through is a matter for debate, as
indeed it is a debate for the content of audit reports.”

Russell said there is potential for audit to
provide even more value – from providing greater clarity in the
presentation of risk, to improving communication with audit
committees and looking at the possibility of providing assurance on
a wider range of information.

“Let’s face it, the numbers in accounts are
difficult for many to understand, confusing even, despite notes
with a mass of data in the back end,” Russell explained.

“So how can we help with assurance over
improved narrative reporting and other information flows?

“We have to, and will, crack this. Indeed, on
the back of the [recent research], our financial services faculty
will publish recommendations in this area shortly.”