My background is as a professional auditor with EY, and my entire professional career has been auditing large, multinational companies, listed both in the UK and in the US. So as my time is spent auditing UK-listed companies that are also Foreign Private Issuers, I am affected both by Key Audit Matters (KAMs) and Critical Audit Matters (CAMs). It is very interesting for me to be able to contrast them and study the differences between the two.In terms of audit quality that Minutti-Meza (2021) mentions, I think there are two areas, certainly in the UK, where changes have caused a significant improvement in audit quality. The first was the mandatory rotation of audit firms, the rule that came in a while ago, where essentially in the UK a company has to re-tender its audit at least every ten years and an auditor cannot be appointed for more than 20 years. In other countries in Europe that period is shorter. That has made a substantial difference to audit quality because for the first time we have seen firms now compete on quality. That is very obvious in terms of how the audit profession works now, where we are very clearly competing with each other on quality; and part of the way that we do compete on quality is through our extended audit reporting, which is the second area of significant change.For me, there is a very substantial difference between the UK and US audit reports. In terms of the informational value and the new information that investors are getting from the extended audit report in the UK, I think they are getting very substantial additional information. But this is not so much the case with the US report.The genesis of the extended audit report came from the Financial Reporting Council in the UK, and from the Codes & Standards Committee, of which I was a member at the time. The initiative was led by the then Chairman, Nick Land, and the technical director Marek Grabowski. They had spoken to investors, as we spent a lot of time doing, and the view that we got from investors is that they wanted to get a lens into the discussion that goes on between the auditor
When it comes to the way in which banks report the effects of financial instruments, the position of the global accounting firms is crucial. This article explores the difficulties ahead. It suggests that fair value has a place in the system but that using them to report earnings would create huge difficulties, simply because existing systems of performance measurement would not be up to the task.
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