Following the recent publication of the Financial Reporting Councils (FRC) annual audit quality inspection report, 2020/21, the quality and standard of audit in the UK has again been brought into question.
With previous annual reports already highlighting the need for changes and improvements, the FRC expressed disappointment that there appeared to have only been a marginal improvement in this year’s reports (published 23rd July 2021).
With 29% of all of the audits reviewed requiring improvement or significant improvement, Sir John Thompson, CEO of the FRC, stated, “While these results show some improvement on last year’s results, this improvement is marginal and significant change still needs to happen to meaningfully improve audit quality.
High quality audit is essential to maintaining trust and confidence in the UK’s financial markets. If the UK is to retain its position as a world leading professional services marketplace, and a global financial centre, outstanding audit quality and rigorous professionalism is at the heart of this.”
With the report focussing on the UK’s seven largest audit companies, Big 4 included, the report makes for worrying reading and raises serious question marks about the quality of audits conducted by some of the UK’s most prominent firms.
Further details of the FRC’s report can be found here.
With measures, recommendations and new legislation all being implemented to help govern audit standards and quality, the importance of audit for UK accountancy practices has never been greater.
With the FRCs intention to create ARGA (Audit, Reporting and Governance Authority) to help govern and promote improved audit quality, audit strategy and compliance are likely to feature heavily on boardroom agendas.
Additionally, the proposals to break the reliance on the Big 4 for audit, especially for those companies on the FTSE, by the promotion of challenger firms, could see increased audit opportunities for accountancy firms positioned below the top seven.
All of which leads to accountancy firms ensuring that their audit offering is as robust, stable and effective as it can be.
Unfortunately, this is far easier said than done. The key to a strong audit offering is a strong audit team, and this is where things can get tricky.
The war for talent in the accountancy sector has been getting steadily worse over recent years. Many of our clients report how difficult it is to attract high-calibre candidates.
Attracting high-calibre audit specialists can be even more challenging as audit is often seen as the less interesting side of the accountancy profession. Add this to the fact that some of the UK’s biggest audit firms are being criticised for the standard of their audits, and you could be forgiven for thinking that finding good audit talent is an impossible task.
Is the poor standard of auditing within some of the biggest UK audit firms a reflection of the standard of their audit teams? It might be difficult to argue otherwise.
Does this mean that accountancy businesses should pass over Big 4 or top seven employees when looking for audit talent?
Obviously, the answer to both these questions is no.
One individual does not make a team or a business, so taking each application on its merits is essential.
The FRC’s report findings are more likely to be down to strategy, management, and process rather than individual capability.
However, smaller independent or regional firms potentially have the opportunity to capitalise on this bad press all the same.
Businesses that can offer a wider variety of experience, more direct exposure to a diverse client portfolio and better flexibility with working patterns may well have the upper hand when it comes to attracting the best audit talent.
Bigger organisations can often be less flexible, and employees can be pigeon-holed into certain functions or with specific clients giving less exposure to employees and limiting experiences.
In our Happiness at work survey – 2021, conducted earlier this year, we surveyed accountancy employees on the importance of employee well-being and the value put on it by employees. Results showed that 50% of those surveyed now valued well-being as more important than salary, inferring that it’s not necessarily the higher salary and plush office environment that influence employees’ job decisions. For accountancy employees, auditors included, it’s likely to be a balance of development and experience, flexibility, wellbeing and package.
Suppose accountancy practices can demonstrate a robust audit strategy and process, supported with an employee-centric, flexible culture. In that case, they will undoubtedly strengthen their chances of attracting the best audit talent in the marketplace.
Whilst attraction of top audit talent may be the initial challenge, the key to long-term success is holding on to your best people.
A consistent and motivated audit team will add value to your business and enrich your brand and reputation.
The key to building and retaining a motivated team is engagement and recognition. Auditors and audit teams can often work in isolation, and the emergence of remote working has only served to increase this.
Regular contact and inclusion are essential for you to retain the engagement of your audit team. Remote working practices appear to be the new norm, and technological advances facilitate auditors’ ability to conduct much of their work remotely. Hence, it is critical that Audit Managers and Partners maintain regular communication with their teams.
Recognition should form a significant part of this process, with teams and individuals recognised for their contribution. Recognition can come in many forms and doesn’t always need to be financially related. Increased responsibilities, more complex assignments, promotion and management responsibilities can all be packaged as recognition, but equally, a simple “well done” is often all that is required.
Today’s working generation, auditors included, is not one that looks intending to find a job and build a long-term career. It looks for challenges, experience and progression and is far less likely to stick around if these requirements aren’t met.
Future audit strategies
Audit is well and truly in the spotlight with a focus on improvement and more robust regulation, meaning that accountancy practices must respond with robust audit strategies.
The strength and capability of an accountancy practices audit offering are only as strong as its audit team. Therefore, accountancy firms must be alert and focused on attracting and retaining a motivated and capable audit team.
Attraction and retention strategies must be up to date with the evolving needs of today’s workforce and reflect the demands of the working environments and practices.
The outlook is gloomy for those accountancy firms that cling to traditional methods and fail to embrace agility and flexibility.
As a specialist recruitment supplier to the accountancy sector, Public Practice Recruitment Ltd hear stories daily from disillusioned auditors looking to move companies because they are not challenged or feel overlooked or are disengaged with their current employer.
To help our clients attract and retain the best audit talent, we’re providing as much evidence and advice as possible on how to best position and structure your business to attract and retain the best audit talent.
Found this interesting? Why not read the accountancy firm’s guide to employee value propositions to find out how to attract and retain talent.
Are you recruiting for an accountancy position?
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Call Public Practice Recruitment Ltd today on 03335 777 787 to discover how we can support you.