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In outlining measures taken by PwC to help rebuild trust in the past decade in the wake of the Enron and WorldCom collapses, Ian Powell told ACCA’s International Assembly, that trust can only be rebuilt with clear communication, transparency and accountability, and said that high quality audits were also crucial to restoring and maintaining confidence.
He said: "However, I do believe that the current audit model and indeed wider corporate reporting, could be improved to meet the changing needs of market participants. In fact the overall model is long overdue some serious discussion. For me, the fundamental questions revolve around the scope of the audit – should this be extended, and the nature of the audit report itself.
"It is clear from discussions I have with senior figures from the business, investor, auditing and regulatory communities that there is a real appetite for a debate on the future of auditing. I can assure you that PwC wants to play a part in this discussion."
Mr Powell told International Assembly members from around the world that he was pleased to see that a recent PwC global survey of finance professionals suggested that audits and audit opinions were still highly valued and have a major impact in influencing investment decisions. Mr Powell said that those surveyed agreed that management, audit committees and auditors all had a part to play in ‘beefing up’ the audit process; that investment professionals were interested in assurance over broader metrics that also have the power to move markets and not just bottom line profit; and that there was also a desire for audits and financial reporting to evolve, in order to remain reliable, relevant and valued in the future. Also the survey showed that more investment professionals than not consider the audit profession to be sufficiently independent – but some suggest such confidence could be boosted by more regular dialogue between auditors and shareholders.
"Such insights into the views of the investment community help show us why we need to work for reform in the corporate reporting environment as a whole", Mr Powell said.
"Firstly…we need to be prepared to talk more openly about our role, and be more transparent about the difficulties we face, be less risk averse, and be brave when considering any necessary changes. Secondly, for auditors to be more open will need structural as well as attitudinal change. In my view achieving this will only become possible with the creation of safe-harbours for directors and auditors. Finally: the regulatory landscape. Any strategy, including in the field of regulation, needs to set out a long-term vision of what it wants to achieve not just what it wants to prevent. As Warren Buffet has said, 'In the business world, the rear-view mirror is always clearer than the windshield'."
Concluding, Ian Powell said: "The audit alone cannot solve all the current issues. But there are challenges that auditors can and must respond to; and my firm is determined to take a lead in seeking to achieve genuine improvements in the short term. We should be prepared to debate these issues and then move quickly to implement any necessary reforms. This should be a holistic process with the key focus on benefits for the global market as a whole."