“I felt like a number to them. They have no interest in our business and what we do.”

“It’s time-consuming for me, but more stressful for the financial controller.”

“I’d describe it as a necessary evil.”

These are just a handful of the responses we received when we asked several finance professionals about what audit meant to them.

They’ll be depressingly familiar experiences to many, but they’re also illustrative of a bigger problem with the way the industry works – one that’s been highlighted by the collapse of Carillion in 2018 and the slew of high-profile failures dominating the headlines since.

Recent inquiries into the industry have found an urgent need for reform among the UK’s four largest audit firms.

In December last year, the Competition and Markets Authority recommended a split between the Big Four’s audit and non-audit services, having found evidence to suggest conflicts of interest have undermined the quality and reliability of their audits.

This view was backed in a report published this April by the Business, Energy and Industrial Strategy (BEIS) Committee, which described a ‘crisis of trust’ in the industry.

The Big Four themselves know things can’t carry on this way, having admitted their work has not been good enough.

This isn’t new. There are problems in audit that have been around for much longer – the BEIS Committee’s report points out that there have been calls for reform for almost a century – and they’re not limited to the Big Four.

EVOLVING AUDIT

Whether the large firms like it or not, change is coming to the industry as a whole.

It’s coming in the form of new legislation, but it’s also taking shape through the changing expectations of audit clients, with research from the Association of Chartered Certified Accountants showing that 70% of the public want to see audit evolve to prevent company failures.

Reform might be one option, but I don’t think we can trust the Big Four, or any of the largest auditors, to be instrumental in the kind of change we need. They’re too big, too slow to manoeuvre, and ultimately too set in their ways.

I think the real change is going to come from the smaller and mid-tier firms. It’s going to come from those that can dedicate the right amount of time and resource to every one of the businesses they work with, and work in a way that’s fair to them.

TRUST AND COLLABORATION

I started Rise with the belief that a strong relationship of trust between auditors and their clients is the single most important factor in offering a better audit service and reducing fees in turn.

As it stands, the relationship between these two parties is all too often one of distrust.

Auditors often feel their client is obstructing their work, while finance directors and CFOs find it hard to see the value in what feels like an elaborate box-ticking exercise.

In reality, the auditor and audited have the same goal. What needs to change is the way they work together to achieve it.

Going back to our research into finance professionals’ audit experiences, one response in particular demonstrates the problem:

“I used to be an auditor myself, so I know how they work and what they are looking for. As long as you are prepared, it isn’t an issue.”

Knowing what was expected of them and the information they needed to gather beforehand, this respondent was able to prepare fully ahead of the audit. The time saved with this inside knowledge would have translated into lower costs, and a much easier process for everyone involved.

Of course, not everyone used to be an auditor, so not everyone knows this. That gap in understanding results in time-wasting, delays, and unnecessarily high fees.

It’s time to stop treating the audit process like a dark secret, and start communicating properly instead.

You can find out more about Rise’s new approach to audit here, or you can read a more in-depth discussion in my book, Bring On The Audit.