The report published today by Chartered Accountants Australia and New Zealand (CA ANZ), the Association of Chartered Certified Accountants (ACCA) and the International Federation of Accountants (IFAC) provides compelling evidence that "the presence of multidisciplinary firms in a large and evolving corporate reporting system fills a valuable market need" and simultaneously commends how the rules that have evolved over the past two decades "mitigate risks associated with audit firms providing non-audit services to some audit clients."
The report, Audit quality in a multidisciplinary firm, draws its findings from leading academic literature, views of policy experts, and an in-depth study of how regulators worldwide manage risk. It is meant to contribute constructively to the international debate on the multidisciplinary firm business model and auditors providing non-audit services.
The report notes that high quality audits require "a diverse skill base" and that "the multidisciplinary model is one of the best mechanisms to develop the skills, expertise and consistency needed for quality audits."
The narrower issue of providing non-audit services to audit clients is more nuanced. The report notes, "There continues to be concern that independence is compromised in doing so, in spite of strict rules that prohibit or restrict firms from providing such services to audit clients."
"Services that are permitted quite often are complementary to the audit, and threats to independence can be effectively mitigated. However, demonstrating to the public that perceived conflicts of interest are being appropriately managed is challenging."
The report continues: "As this issue continues to be considered, it is important to remember that evidence cited in this paper calls into question the need for sweeping regulatory changes that could have unintended consequences on audit quality" and notes that "the vast majority of non-audit fees actually come from clients for whom firms do not provide audit services."
Amir Ghandar, CA ANZ Reporting & Assurance Leader, said: "The multidisciplinary base of auditing firms is a strength that contributes to audit quality, but firms and the profession at large must continue to actively establish and demonstrate a culture of integrity through governance, transparency, and our core ethics."
"Robust independence rules have evolved over the past two decades to mitigate real or perceived risks of conflict of interest associated with audit firms providing non-audit services, and these should continue to evolve in order to keep pace with public expectations and emerging challenges."
Maggie McGhee, executive director - governance at ACCA, said: "We welcome a robust debate on these issues that no doubt will continue to be important for the profession and policy makers, and encourage a conversation grounded on the facts."
"ACCA is delighted to publish this report with our colleagues from CA ANZ and IFAC. It is the latest example of the benefits which our alliance creates for our members and our students, as well as for the accountancy profession and the public interest."
Kevin Dancey, IFAC CEO, said: "Questions about audit quality, independence, and competition are always worth asking. But no one should rush to conclusions. The business case for the multidisciplinary model is strong and there is significant evidence in support of the model. Let's work with the facts as we continue to best serve the public interest."
Read the report
New report examines the relationship between multidisciplinary firms and audit quality.Find out more