The competition amongst the firms are getting tougher, and I really don't like what it's doing to the auditing model. Firms are coming in and under-cutting other firms by offering the audit at half the price of the current audit fees charged by the existing firm. First off, there's a constant pressure on budgets, and the firms keep adding checklists after checklists and other necessary procedures to opine on an audit, effectively telling us to do more work in less time. Like the Wolf says in Pulp Fiction, "That's thirty minutes away, I'll be there in ten".
Secondly, given the lack of new clientele, firms are going in and undercutting each other like crazy. It's not like our budgets or our fees for that matter are too high. I mean, take a look at the invoices you pay your law firms. I don't hear any complaining there.
Look, I like competition, I'm all for being efficient. But this industry isn't like a grocery store - we sell cheap, so shop with us. Here's the thing, we audit financials not for the Company, but for the use of shareholders (public companies) and banks/investors (private companies). So for Companies to come in and almost force our hand to reduce hours, and in effect, reducing our audit work, we're not doing the best we can. As a user of financial statements, I'll be concerned. I mean, I'm okay if the Company I own has to pay 10-20% extra to make me feel comfortable relying on the financials.
I know this country is divided, 50% is for regulation and 50% is not. I'm all for deregulation in most industries, but there are certain industries that shouldn't be fully influenced by the free market, audit being one of them. There's a reason cops aren't run by the private sector. That being said, how about using an independent arbitrageur to mediate between clients and auditors to set audit fees. The independent can look at the required work and decide if the fees are too high/low, thus setting a range between which we can negotiate.
Getting pressured by management to do what we can to finish on budget is extremely stifling. I'm not blaming management, I'm just blaming the budgets. We seem to be going down a dangerous path that compromises the quality of our audit work.
PS - I can't believe I just said that
Comments
Not sure how you can blame the budget, but not management, as one follows the other (unfortuntately, it appears backward).
It makes you wonder how many exceptions get "overlooked" simply because dealing with them and doing the extra testing would take too much time.
So the clients haven't complained or noticed the decline in quality?
I have a question for you. You have written about how boring and tedious audit can be, and how some graduates drop out after a year or so. I wanted to know if it is possible to join a different business stream if you don't like audit after a year or so. For example are there opportunities to move into Consulting or Financial Advisory?
Also how closely do you work with other business streams, and do you end up having good working knowledge of what exactly they do?
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