According to a Financial Times article posted today, KPMG UK's former head John Griffith-Jones — who is now a regulator for the UK's Financial Conduct Authority — dropped a bomb at a posh lunch for accountants in London recently.
Griffith-Jones verbalized what many of us already know and have been saying for years. FT says he "lamented that auditors were flirting with irrelevance by supplying information that was 'less and less useful to the world at large.'"
It's one thing for a confused layman or even inexperienced "journalist" to complain that audits aren't catching enough fraud (as the jury is still out on whether that's what they're actually supposed to do) but when a former and current Big Deal in the Profession says stuff like this out loud, it might be worth listening to him.
Here in the U.S., our delicate, mysterious audit regulator doesn't help matters by putting out cryptic guidance and criticizing audit firms without informing issuer audit committees of issues, among other crimes. Some of us wish the PCAOB would just grow a pair while still others probably wish they'd go away altogether.
Meanwhile, while everyone has been focused on IFRS convergence in the U.S. or the lack thereof, the AICPA Auditing Standards Board (ASB) has quietly aligned U.S. GAAS with International Auditing and Assurance Standards Board (IAASB) international audit standards, with the hope being that these changes will "make GAAS for nonpublic companies easier to understand and apply, as well as more consistent across international borders, while avoiding unnecessary conflict with auditing standards for public companies issued by the PCAOB." The Journal of Accountancy article that explains The Clarity Project in further detail wistfully questions out loud whether the ASB's project might prompt the PCAOB to make similar changes to public company audit standards.
So yeah, are changes needed in the audit realm? Surely. Can a majority agree on what those changes should be? The IAASB seems to be trying to figure that out, with chairman Arnold Schilder writing in the organization's invitation to comment on changes to the auditor's report:
More than ever before, however, users of audited financial statements are calling for more pertinent information for their decision-making in today’s global business environment with increasingly complex financial reporting requirements. The global financial crisis also has spurred users, in particular institutional investors and financial analysts, to want to know more about individual audits and to gain further insights into the audited entity and its financial statements. And while the auditor’s opinion is valued, many perceive that the auditor’s report could be more informative. Change, therefore, is essential.
Will the PCAOB play tag along or will they spend more time concerned with being unable to audit audits in countries like Hong Kong and China than they are with the quality and usefulness of audits here at home? That remains to be seen.