The Brydon Report - What Does It Mean For The Auditing Profession?
Andy Morris, Dains Partner and Head of Audit, shares his thoughts on the Brydon Report and what it means for the auditing profession.
Dated: 22 January 2020 Author: Andy Morris, Dains Partner and Head of Audit
The year-long review into the British audit industry conducted by Sir Donald Brydon, has made a series of recommendations, some of which may divide opinion throughout the accounting world.
But although the report focuses on the audit industry as a whole, many of these recommendations are aimed at the “big national” firms auditing “Public Interest Entities” (PIEs) rather than specifically targeting firms largely engaged in the audit of SMEs such as Dains.
The thrust of the Brydon Review has been on the quality of audit provision for FTSE 350 companies which follows on from much of the criticism that has been aimed at the oligopoly that the big four firms have over the FTSE 350 audit market, following a number of high profile business failures in recent years.
One of the key recommendations in the report is to provide greater clarity about who audit is for; shareholders, investors and other stakeholders, but for Dains the answer to this question is often never in doubt.
Given the nature and the number of clients we work with in the private sector, at least two of these categories of users of audited financial information are often the same people and therefore by definition the rigour and quality of our audit work has and must continue to be held to the highest possible standard.
For many accountancy firms such as Dains, the work of audit teams and the service they provide has received considerable praise from regulatory bodies consistently over many years showing that not all areas of audit are in need of wholesale reform. Indeed, Brydon concluded himself that audit is not necessarily broken, just misunderstood.
There are many aspects of auditing that we and other accountancy businesses working with owner managed businesses have done and continue to do well.
Although the findings suggest ‘proportionate and practical change to restore public trust’ - trust is certainly not an issue with our clients at Dains who we have developed long-standing relationships and who we continue to work closely with.
The quality and focus of current audit work and standards are also raised in the report but again for audit firms working in the SME sector there are lots of positives with work being carried out by well trained and experienced teams who have an in depth knowledge of the client, allowing reports to be delivered based on a robust audit approach and the judgements of highly skilled professionals.
That aside, there are recommendations in the report which should be welcomed.
For example, the creation of a stand-alone audit profession, aside from accountancy, is something which I feel is overdue.
Auditing is something which should receive recognition in its own right, like other areas of accountancy do. It’s a specialism, so the creation of a transparent audit profession with its own governing body will go a long way to recognising that.
A separate audit profession will also help to attract and recruit more talent into auditing, because of the increased credibility it would hold through having its own governing principles, qualifications and standards.
While the recommendations in the report are clearly going to impact on the market as a whole, and while some of the “big national” firms are reviewing and investing in their audit service provision, when it comes to these auditing reforms, there are reasons to be very optimistic.
Dains is a growing business which is always looking to be progressive and ready to embrace change.
We want to continue doing what we do well but aren’t afraid to implement and develop new ways of working which benefit our clients and complement the auditing profession as a whole.