Auditing is a big deal in the accounting world, especially at Big 4 firms. While consulting and advisory services threaten to eclipse assurance as their chief revenue source, the fact remains that auditing remains the primary revenue stream for three of the Big 4 firms and serves as the foundation for all their reputations.
But auditing's image has deteriorated since the failure of Enron and Andersen, the passage of Sarbanes-Oxley and the creation of the PCAOB. Criticism of the industry reached new heights when audit firms did little to nothing to warn of the impending collapse of the US financial system in 2008. That has caused many — investors, clients, regulators, journalists and other observers — to dismiss the audit opinion's value; that it is rubber stamp, telling investors little about what auditors know about their clients' financial condition or their performance. To make matters worse, PCAOB inspections have found a significant number of deficiencies in the Big 4's audits over the past several years, further questioning their effectiveness and quality. The Wall Street Journal reported on Tuesday that the collective deficiency rate in 2014 for PwC, Deloitte, EY and KPMG was 35%.
More recently, executives at these firms have raised the future of audit services as a talking point, noting that the proliferation of technology will open up new possibilities for providing greater value to users of financial statements. Bill Brennan is PwC's Leader of Assurance Transformation and he's agreed to talk to us about some these possibilities and what they mean for the auditing profession and those who are building their careers in it.