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Published 25 July 2019
Last year’s Kingman Report into the future of audit in the UK, and of the Financial Reporting Council (FRC) in particular recommended the replacement of the FRC with a new regulator – the Audit, Reporting and Governance Authority (ARGA). To the extent that this metamorphosis does not require a Parliamentary mandate, the Secretary of State has decreed that it should begin. In response, the FRC has recently published its plan and budget for 2019/20. This sets out strong indications of what audit firms should expect in the new environment:
This final point illustrates, we believe, the need for an effective advocacy body speaking up for the audit sector as a whole. The FRC says there needs to be a ‘step change’ in audit quality. That may be so, and we are sure the profession favours changes which drive an improvement in standards. But the whole tenor of public debate around audit ignores the fact that audit almost always goes right. The FRC notes that "confidence in audit has fallen" and points to failings uncovered in the audit quality review programme. The FRC also points to high-profile business collapses in which the auditor has been criticised. However, there is no public voice for the vast majority of auditors who are highly competent and professional people with sound fundamental values, and who do a good job. There is an imbalance in how the (non-specialist) media comments on the quality of audit, and this is harming both the audit profession and the public's confidence in the financial sector. Individual failings, including those of corporate management, should not be used to bludgeon auditors generally. A small number of enforcement cases should not detract from that wider truth. This needs addressing.
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