I've posted a few blogs earlier on this new world that we live in. This is a world where we're auditing for the regulators (PCAOB) instead of auditing for investors. We're auditing in fear of the PCAOB or our internal reviews finding something instead of auditing using a sense of reason. This is an era of upheaval that, from my understanding, harkens back to when 404 was first implemented. There is a sea change going on at the Firms because of the new PCAOB demands. It's certainly painful for the people implementing this now, but it'll be fascinating to see if this changes. Once the dust settles on this internal control rehaul, will the PCAOB choose a new battle to fight that will cause another upheaval in the near future. The PCAOB is turning into a dangerous animal, especially since it's backed by the government and is paid for by the private sector (mandatory PCAOB fees for all issuers). With that kind of funding, and with teams dedicated to different accounting firms, what is the incentive for them not to find new issues every years in order to prove their usefulness. Now, don't get me wrong, some of the "clarifications" by the PCAOB of its standards makes sense. You'll hear from most partners informally that the PCAOB is neither just right, nor too much, but somewhere in between. The Firms are certainly pushing back against the PCAOB, but they aren't winning all the battles, and so the auditors have to bear the burden of the battles they lost. Until the SEC conveys this message to the clients instead of the audit firms, there will continue to be even more hostility shown by the clients towards the additional requirements we're asking to be implemented.
The problem with this, for many of the individuals working at the Firms, is that the burden falls on us. This leads to increased hours and increased stress, with the rewards not increasing in proportion. Our fees are not increasing proportionally with our hours, leading to more stress on profitability. A majority of the partners believe that this is just a cycle, and that we will revert back to the mean soon. They may be right,since they've spent more years and have seen several more cycles than us. What is interesting is that since many managers and snr mgrs haven't experienced something like this, they're dealing with the unknown and do not expect this to go away, leading to many of them looking to go away. At the same time, the new blood at the Firms wouldn't know anything else, and it could only get better from here. All in all, the audit factory continues to churn, like it always has.
The problem with this, for many of the individuals working at the Firms, is that the burden falls on us. This leads to increased hours and increased stress, with the rewards not increasing in proportion. Our fees are not increasing proportionally with our hours, leading to more stress on profitability. A majority of the partners believe that this is just a cycle, and that we will revert back to the mean soon. They may be right,since they've spent more years and have seen several more cycles than us. What is interesting is that since many managers and snr mgrs haven't experienced something like this, they're dealing with the unknown and do not expect this to go away, leading to many of them looking to go away. At the same time, the new blood at the Firms wouldn't know anything else, and it could only get better from here. All in all, the audit factory continues to churn, like it always has.
Comments
I've always questioned the future of this industry because of the reasons you stated above. Auditor's purpose has altered quite a bit from its original creation.
How do you see the future in this industry, say 5 years down the road? Hours are inevitably longer, and pay may never catch up to the hours worked since no one ever agree on the fee inflation. All of our work are statutorily based, and we are never really adding too much value that will generate revenue for the clients in my opinion.
Is it better to switch out to other areas of the firm like non assurance services where it may be more meaningful?
I could explain my audit methods, but I don't see why I should, and it seems like the client is just being difficult for no reason (or to stall for time).