The UK boss of PwC said criticism of the audit industry from politicians and regulators was hurting the profession and risked making it harder to attract new hires.
Retaining qualified auditors “also becomes much more difficult if there is an external stream of negativity,” Kevin Ellis, UK chairman and senior partner of PwC, told the Financial Times.
PwC said its attrition levels for newly qualified auditors were 8% higher than in other parts of its business this year, an increase from a 6% differential in 2020.
Only 15% of qualified auditors joining in the next three months were from the UK, with the rest coming from overseas, he added, suggesting difficulties in attracting applicants nationally.
Listeners have come under fire after failing to sound the alarm before the bankruptcy of companies such as retailer BHS, subcontractor Carillion and coffee chain Patisserie Valerie. The big four accounting firms – Deloitte, EY, KPMG and PwC – have been fined Â£ 42million over the past three years for audit failures.
Labor MP Rachel Reeves, then chair of the House of Commons affairs select committee, said in 2019 that auditors were ‘complicit’ in these business failures and told business bosses’ we can’t count on you to do the right thing â.
Sir Jon Thompson, chief executive of the Financial Reporting Council, said last month that the Big Four “sometimes don’t run their own affairs very well,” prompting Ellis to accuse the regulator of inconsistency between his public statements and his private comments to PwC.
Ellis said, âAuditing always has a ‘halo’ for newbie hires because it is seen as trusted business training. . . However, its attractiveness. . . is damaged if the external discourse of politicians and regulators focuses on the negatives rather than its critical importance to the economy, supporting investment decisions and the confidence of capital markets.
“At a time when investors want to assess companies on the climate and other ESGs [environment, social and governance] problems, the auditing profession cannot afford to lose capacity. We need more listeners, not fewer.
He added that when it came to criticizing listeners, it was important to distinguish between cases “where, in hindsight, the listeners turned out to be wrong” and those where there had been a “wrong.” behavior âon the part of accounting firms.
This would be important in the years to come, as economic conditions mean more businesses are likely to be strained.
âAt some point you feel there’s a wall of insolvencies that’s going to happen,â he said. “If the reaction is again ‘where were the listeners? It doesn’t make it easier to tell a 23-year-old that auditing is where you should spend the next 25 years of your career. “
PwC is under investigation by regulators over its audits of collapsed mini-bond firm London Capital and Finance and Wyelands Bank, owned by industrialist Sanjeev Gupta.
Accounting firms are engaged in a battle to recruit auditors as they seek to expand their teams to improve the quality of audits and capitalize on the demand from companies to verify non-financial information in areas such as its climate impact.
The FRC has also grown, recruiting heavily from the same pool of qualified auditors as the accounting firms it regulates.
Ellis praised the FRC’s goal of becoming an âimprovement regulator,â helping companies improve the quality of their audits instead of focusing primarily on mistakes made.