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Battle lines drawn over auditors’ role in combating fraud

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Summary

The article discusses the possibility of auditors taking a bigger role in fraud detection as a result of the corporate collapses at Carillion, BHS, Thomas Cook, and Patisserie Valerie. It also explores the opinions of the Big Four accountancy firms, professional associations, and limited companies on the issue. There is divided opinion on the issue, with some arguing for greater clarity in auditing responsibilities and others noting the challenge of rising audit costs. The article also explores the potential role of a new regulator, ARGA, in improving public trust in how large UK companies are run and ways in which the accountancy profession could take on a greater responsibility for fraud detection.

Q&As

What measures did the UK government take to address corporate fraud in the wake of collapses such as Carillion and Patisserie Valerie?
The UK government launched a wide-sweeping consultation to address corporate fraud in the wake of collapses such as Carillion and Patisserie Valerie.

How have the Big Four accounting firms responded to the government's consultation process regarding fraud detection?
The Big Four accounting firms have responded to the government's consultation process regarding fraud detection, but have given little away on the substance of their responses. Paul Stephenson, managing partner UK auditing and assurance at Deloitte, is the only Big Four firm to comment.

What role does the Auditing, Reporting and Governance Authority (ARGA) play in strengthening corporate governance?
The Auditing, Reporting and Governance Authority (ARGA) will supersede the FRC and is intended to improve on the performance of its heavily-criticised predecessor. It will include strengthening of companies’ internal controls through the Corporate Governance Code.

What challenges does the professional services industry face in the digital age?
The professional services industry faces digital disruptions, increased competition, and changing market demands.

What is the likelihood of meaningful reform of audit and corporate governance in the near future?
The likelihood of meaningful reform of audit and corporate governance in the near future is uncertain, as it may not be covered in the King’s Speech in November. However, there is cross-party support for delivery of the new regulator.

AI Comments

👍 This article does an excellent job of exploring the implications of the new regulatory changes and how they could impact auditors' role in combatting fraud.

👎 The article fails to offer any concrete solutions to the issue of auditors' responsibility for fraud detection, instead relying on vague statements from key players in the industry.

AI Discussion

Me: It's about how auditors' roles in combating fraud are being debated. It discusses the implications of the corporate governance code and the new regulator, ARGA, on auditors' responsibility for fraud detection. There are some conflicting opinions on the issue and it looks like the government is still deciding what to do. It's an interesting read.

Friend: Interesting. It sounds like the government is still weighing the pros and cons of the situation. Do you think the changes will be meaningful?

Me: It's hard to say. It looks like the Big Four firms are trying to stop the government from taking a more active role in preventing and detecting fraud. They're concerned that it would lead to higher audit fees. And there are some concerns that the new system won't be able to handle the kinds of fraud which could be enabled by artificial intelligence. So it's a complicated issue and it looks like it will take some time to figure out the best solution.

Action items

Research the current corporate governance code and the proposed changes to it.
Research the Auditing, Reporting and Governance Authority (ARGA) and its potential role in improving auditors’ responsibility for fraud detection.
Research the potential impact of artificial intelligence (AI) on fraud detection and the role of auditors in this process.

Technical terms

Auditors: Professionals who examine and verify financial records and statements.
Fraud: A deception or misrepresentation made with the intention of gaining an advantage.
Corporate Governance: The system of rules, practices, and processes by which a company is directed and controlled.
Big Four: The four largest international accounting and professional services firms in the world.
VAT: Value Added Tax, a tax on goods and services.
MTD: Making Tax Digital, a UK government initiative to make it easier for individuals and businesses to get their tax right and keep on top of their affairs.
ESG: Environmental, Social, and Governance, a set of standards for a company’s operations that include factors related to environmental protection, social responsibility, and corporate governance.
Regulatory Bodies: Organizations that are responsible for regulating activities in a particular industry or sector.
HMRC: Her Majesty’s Revenue and Customs, the UK government department responsible for the collection of taxes.
Security: Measures taken to protect a system or data from unauthorized access or attack.
Politics: The activities associated with the governance of a country or area, especially the debate between parties having power.