Last week the Australian Securities and Investments Commission (think Aussie PCAOB) informed us that Deloitte and KPMG need to take “continued deliberate and concerted action” to improve the quality of their audit work because apparently it is just that bad. Deloitte did not meet ASIC standards on half of audits inspected, KPMG came in at 48 percent. EY had the best performance of Big 4 firms comparatively speaking however their audit quality plummeted from the year prior compared to themselves. PwC had slightly more issues than EY (17 percent of inspected audits were not up to snuff compared to 15 percent for EY) however theirs were not scarily worse than prior year like EY’s and in fact had improved from 25 percent last inspection cycle. In short, things are not looking so hot for upside down auditors.
Australian Financial Review had a good piece on the issue of Big 4 audit quality the other day that covers the basics of recent ASIC inspections — poor assessment of asset values and impairments were the biggest issues in audit work across the board as well as reviews of revenue — and now AFR has highlighted Deloitte’s comments on why exactly their audit work is so bad. Ready for this? Auditors are tired.
Deloitte’s managing partner of audit and assurance, Joanne Gorton, said the firm was “investing heavily in technology” to improve its audit work. Audit staff were also undertaking more training to raise quality.
This included taking all assurance staff, “from our newest recruits and graduates up to the most senior partners”, out of their regular work for three days this year to train them up in the new technology and upskill their audit judgment skills, Ms Gorton said.
Deloitte’s partners were told in a crisis meeting over the ASIC results last week that fatigued staff and missed deadlines were two causes of the slump in quality, and Ms Gorton said plans were under way to mitigate these factors.
“We’re trying to spread out the work over the year because that makes the workload much more manageable,” she said.
You’ll note Australia is struggling with the same auditor shortages as every other market. So good luck spreading that around, there’s no one to spread it around to.
It sounds like Deloitte Australia is importing some talent (100 new recruits, says AFR) and grabbing people from other teams to help with audit work, the latter being something we heard was happening at large firms in the U.S. last year for year-end inventory counts.
The issue of audit quality has long plagued firms (excepting PwC’s nearly flawless 2020 PCAOB inspection report) and the issue of auditor burnout and exhaustion as it relates to talent shortages is directly linked to said quality. See: The Audit Profession’s Inability to Retain Talent Poses a Serious Threat to Audit Quality. The massive technology investments firms are making today needed to be made yesterday and even with firms shoving more than half of new hires into audit (U.S. data) it may not be enough. No, it definitely won’t be enough. We’re trapped in a catastrophic cycle of accelerated burnout which leads to leaving which leads to even smaller teams doing the same amount of work. And we’re wondering why no one wants to take this career path? A starting salary of $65,000 in AUS is about $41,000 USD btw. And $65,000 is a high end figure for new graduates hired into assurance at Deloitte Australia.
Things are going to get a whole lot worse before they get better. May God have mercy on auditors’ souls.