The International Federation of Accountants (IFAC) has published a detailed analysis of public responses to the Monitoring Group consultation paper – and it makes for fascinating reading.
This is one of those areas where we can struggle to explain how technical-sounding processes have a real effect on business and society. The importance of the Monitoring Group consultation paper, Strengthening the Governance and Oversight of the International Audit-related Standard-setting Boards in the Public Interest, may be apparent to those in the profession, but I imagine most of us wouldn’t bring it up with non-accountant friends over a pint.
The consultation was initiated following concerns about audit quality at the highest level. Behind it are the International Organisation of Securities Commissions, the Basel Committee on Banking Standards, the Financial Stability Board, the International Association of Insurance Supervisors, the European Commission and the World Bank Group. This is a concerted effort, at the very highest global level, to make sure audit works in the public interest. The swiftest glance at a newspaper recently will confirm that “does audit serve the public interest?”, is currently a live question for the profession and laypersons alike.
One criticism levelled at the profession, is that it is too involved in setting its own standards. This is often unfair. No one doubts there is substantial interest in audit at the moment, but I do wonder how many people, hand on heart, can say they take an active interest in frameworks for international audit standard-setting and know enough to be able to determine what requirements are going to be practical and effective.
It is important that people do get involved and it seems they have been. IFAC commissioned an independent analysis by Gibson Dunn to assess public responses to the consultation document. There were 179 responses, from a huge range of stakeholders in different sectors; standard setters, regulators, government auditors, investors, firms large and small, professional bodies, researchers and even individuals – from right across the globe.
The level of response may come as a surprise. Yes, there is overall support for some of the detailed operational changes proposed in the paper. But there has been significant criticism of the broader governance changes proposed, and – more generally – scepticism around the premises of the paper itself. Respondants, including ourselves, questioned not just how best to serve the public interest, but whether the MG has got it right in its definitions, or whether it is even looking at the right things to change. The full report can be found here.
This may appear disheartening once you cut through the diplomatic language. There is “widespread support for further deliberation, additional opportunities for comment, and/or additional studies before any concrete action is taken with respect to the Monitoring Group’s proposals.” In other words; we’re not sure this is good enough, try again.
But this is good news. It was vital that this analysis be done; we will get nowhere without directly engaging the stakeholders we wish to serve. The next set of proposals need to reflect this thinking, and they will be all the better for it.