LSCA President: perfect audits cost
Writing in the Financial Times, London president Malcolm Bacchus argues that the public needs to understand there has to be a trade-off between risk and reward over the assurances auditors can, and can’t, provide.
Following letters published by the Financial Times from former Financial Reporting Council chief executive Paul Boyle and former World Bank vice president Jules Muis, LSCA President Malcolm Bacchus says there is “no conceptual reason why audits should not be perfect”. However, he argues that such a situation would be "ridiculously expensive".
His letter, published on 22 March 2018, says that while he did not disagree with Boyle that there was a demand for high quality audits, “that demand is not from those who pay for it — the demand is from the public”.
“I do not see the demand from the companies themselves. And therein lies part of the problem”.
Bacchus argues that if the risk outweighs the reward, firms will simply not be willing to undertake audit work to cover society’s expanding obligations, or will be driven out of the market.
“Until we understand how society requires the risks and rewards to be changed and work out who bears the cost of that change, any proposal is just tinkering in the dark” he says.
The full letter can be read here: Audit can be perfect — but that would come at a cost
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