Are auditors fit for purpose?
The Bottom Line
BBC
4.6 • 606 Ratings
🗓️ 21 February 2019
⏱️ 28 minutes
🧾️ Download transcript
Summary
What's the point of an audit if it fails to detect when a company's about to go under? The sudden collapse of BHS, Carillion and Patisserie Valerie has dented public confidence in the firms that audited them and prompted calls for a shake-up of the audit industry. Would more competition in the sector, which is dominated by four big players, drive audit quality up? Do accountants need to be more robust in challenging company figures?
Joining Evan Davis for The Bottom Line:
Bill Michael, UK Chairman and Senior Partner at KPMG. Jac Berry, Audit Partner and UK Head of Quality at Mazars and Christopher Humphrey, Professor of Accounting at the Alliance Manchester Business School
Transcript
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| 0:00.0 | BBC Sounds, Music, Radio, Podcasts. |
| 0:05.1 | Hello and welcome to the programme. |
| 0:07.6 | Accountants, what's the point of them if they do an audit |
| 0:10.6 | and fail to detect a company is about to go under? |
| 0:14.0 | Most of us would think they have one job to just tell us |
| 0:17.6 | whether the company is solvent, |
| 0:19.2 | and yet they appear to regularly fail at that |
| 0:21.5 | task. Maybe it's not their fault. We don't want to be too simplistic here, but cases such as |
| 0:27.6 | BHS, Carillion and more recently Patissary Valerie, all of whom collapsed apparently without warning, |
| 0:33.4 | have dented confidence in the firms that audited them. It's thrown the whole accountancy |
| 0:38.4 | profession into the spotlight. It's prompted calls for a shake-up of the audit market. There is a |
| 0:44.1 | plethora of reviews that have been done or are underway. The Business Select Committee, |
| 0:49.4 | Bays, Kingman, Bryden, the Competition and Markets Authority, and it's a hugely important issue because |
| 0:55.4 | trust in company figures underpins the whole working of the capitalist system. So that is our |
| 1:00.9 | topic this week. Audits fit for purpose and if not, how can they be improved? Well, it's a complex |
| 1:07.1 | topic, but we have three guests to shed some light, all people who should know where the bodies are buried. Let's meet them now. First up, Bill Michael, UK chairman and senior partner at KPMG. It is one of the big four auditors in the UK. How big is it, Bill? We've got about £2.5 billion of revenue in the UK. We employ about 16,000 people. We're |
| 1:28.6 | in 22 offices. And of course, we're a big global network with the second largest member |
| 1:32.8 | firm in KPMG. You're the second largest in the KPMG international operation. What proportion |
| 1:38.6 | of your business is auditing? About a quarter, I would say, is auditing. So about 500 plus of the 2.5 billion is audit and audit related. |
| 1:47.6 | Tell us what the other three quarters is. If a quarter is auditing, what's the rest? |
| 1:51.3 | Broadly, we've tax services, tax-related services for clients. We do work around deals, so mergers, acquisitions, due diligence, etc. |
| 1:59.2 | Insolvencies. And then, of course, we do consultancy type work. |
... |
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