Since joining PwC in March 2020 as an independent non executive, I’ve seen first hand how the firm’s robust and mature governance structures have evolved - in particular to strengthen the oversight of the audit practice.
This ‘evolution’ of audit governance has principally been borne from the firm’s Programme to Enhance Audit Quality, which created a separate audit practice with increased oversight from the Public Interest Body. The governance and oversight of Audit has been strengthened further to address the FRC’s principles for operational separation which are due to come into force within the next three years.
Specifically the Audit Oversight Body (or ‘AOB’) was established in November 2020, and I am delighted to chair this critical governance body at a time when audit quality, audit culture, and the audit profession as a whole remain under the spotlight.
As the name suggests, the AOB provides oversight to the firm’s audit practice, to ensure the firm remains focused on the delivery of consistently high quality audits.
Our responsibilities range from assessing the audit strategy, to reviewing audit practice culture and controls, and monitoring the progress of the firm’s Programme to Enhance Audit Quality.
During the year the AOB has monitored the results of audit inspections, as well as the reviews of the firm's quality control framework, and other audit quality indicators.
We have reviewed the firm's root cause analysis and challenged the management of the audit practice as to the remedial actions they are taking.
It is also important that oversight is given to the ‘levers’ adopted by the audit practice to promote and reward the right behaviours. We do this through a committee of the AOB formed entirely of independent members, called the Audit Partner Remuneration and Admissions Committee (or ‘APRAC’).
This committee reviews the audit partner remuneration and admission processes with particular consideration being given to how audit quality is embedded within the relevant policies and processes.
I’ve spent time with PwC audit teams and culture champions and have been struck by their commitment and passion for the work they do. These interactions have helped me to understand more about the day to day reality of what it’s like to be an auditor - including the emerging hot topics in the industry, and the complex judgements and challenges teams can face.
At a time when the profession is under significant scrutiny, and against an uncertain economic background, it is important to highlight the role that PwC, and the audit profession, plays in the UK economy.
I have also been able to appreciate how the breadth of capability right across the firm is helping to deliver quality audits in an ever more complex environment. The specialists and experts that audit teams can draw upon bring tremendous value, and help those teams address complex issues in the audit.
I am encouraged by the progress the firm has made in delivering its Programme to Enhance Audit Quality and by the improvement in this year's AQR inspection results. However there is still more to do and the firm must build on this momentum and remain focused on delivering consistently high quality audits.
It is vital we continue to build trust in audit, and subsequently confidence in business - benefitting the wider corporate governance and reporting ecosystem.
So what does the next 12 months have in store for the AOB?
We will continue to provide governance and challenge to the audit practice and constructively engage with stakeholders including the FRC to share our perspectives on how, we believe, high quality audit services can be delivered for the benefit of the public interest.
More needs to be done to promote the attractiveness and importance of the audit profession, now and in the future. The AOB will continue to challenge PwC to consider the role they play in promoting that positive change.
Finally, we are pleased to welcome Caroline Gardner onto the AOB. Caroline was appointed on 31st August this year as an Audit Non Executive. Caroline brings a wealth of audit knowledge and experience to the AOB which will be invaluable as we move through another significant year for the audit profession.