Page 20 - Patisserie Valerie Teaching Note

A9 The former (can auditors detect all fraud?) has been a hotly

debated public policy issue since the 1970s. And the latter

(should auditors be guarantors of business plans?) has been a
contentious political issue since the financial crisis a decade

ago. Issues of corporate governance, the cost and objectives of

financial reporting and the nature and cost of assurance for
lenders and investors are matters that must be initially

addressed by policymakers and regulators. Blaming auditors is
convenient, but not useful. Consulting necessary to attract

talent. (23)

However, the vast majority of complex audit work is carried out
by inexperienced and overworked audit juniors.

Over the past five to 10 years in an effort to maintain margins,

audit partners have increasingly shifted complex work lower
down the chain of experience, while also increasing hours. They

consistently work hours at least as long as those worked by

investment bankers or management consultants, for a third or
less of the pay. Having gone through the process and exited to

do advisory work, I would not recommend it to anyone.

Spinning off advisory and thus removing a potential exit
opportunity will just reduce the calibre of students joining the

Big Four, thereby making audit quality even worse in the long
run. (23)

Q10 The pressure for firms to use one of the Big Four is immense
but what can be done to change this.

A10 the “requirement” that one used one of the Big Four

accountancies and one of the “magic circle” law firms, which
effectively creates low quality and breathtakingly expensive

monopolies. Auditors should work for stock exchanges A better

suggestion would be that the audit firm is engaged on behalf of