There’s an old joke about consultants: you ask a consultant what time it is. They take your watch, tell you the time, and walk off with the watch.
That’s clearly the case among several large audit firms. Even worse, they’re draining their clients’ time and resources as they do it.
When you’re being audited, there’s nothing more frustrating than having to explain, over and over again, the fundamentals of your business to a team that doesn’t have the industry knowledge to understand it.
One finance manager we spoke to had the following to say about their most recent experience of audit:
“They were new auditors which meant they were inexperienced. They didn’t understand the business, so we had to start from scratch and explain everything to them. They clearly didn’t do any research or understand their clients.
“They were very young, straight from university, and had no industry experience so it wasn’t much of a partnership. It didn’t feel like working with a real, built-up audit firm.”
Another respondent had much the same opinion after being sent an inexperienced team, who “didn’t know the business and were expecting to be trained by the company”.
It should go without saying that a high-quality audit needs experienced and competent staff. But, as these responses show, the reality in many cases is different.
Large auditors often send teams made up of trainees and recent graduates to audit their smaller clients, simply because it’s convenient for them.
It’s a chance for them to train their own staff while cutting down on the cost of using more experienced auditors. It’s a streamlined process, but only to the benefit of the auditor.
The quick turnaround of audit staff in these teams can make it difficult to maintain any consistent sense of understanding. As a result, audit clients often end up having to explain the same details about their business with each audit, year after exhausting year.
In many cases, when a senior auditor is present, they tend to show little engagement with the process and instead delegate most of the work to the junior staff.
This isn’t just a problem from the perspective of the client relationship. It’s also a worrying sign when it comes to the quality of the audit. Audit staff need specific sector knowledge and experience to be fully aware of industry risks, and to exercise the level of judgement necessary for a reliable audit.
The problem was highlighted in the CMA’s inquiry into the audit industry, which pointed out that in theory, if the quality of audits were to improve you would expect to see an increase in engagement from senior partners.
On the contrary, audit engagement hours worked by partners in the FTSE 350 fell from 5.2% in 2014 to 4.3% in 2017.
I don’t think this way of working is right, and I don’t think audit clients should have to put up with it.
At Rise, we offer something different. With us, you’ll work with experienced staff who understand your business and the industry it operates in.
Get in touch to find out more.