Auditors are failing to provide a proper check on companies’ financial health, costing jobs, harming the economy and undermining public trust in business.
Bosses of high-profile collapsed companies like Carillion, BHS and Thomas Cook were able to take reckless gambles, financing big shareholder payouts by racking up debt to generate big bonuses, rather than shoring up company finances and acting in shareholder interests.
If auditors had flagged the risks and forced the companies to act, their collapse might have been prevented. But instead they went into liquidation, devastating supply chains, costing tens of thousands of jobs and leaving taxpayers to pick up the bill.
Auditors have little incentive to challenge the companies they audit. Weak regulation leaves auditors with too much wriggle room to interpret their role as it suits them and not take responsibility for the risks they are assessing.
High interest rates are a ticking time bomb that will push even more companies, like Thames Water, into financial crisis.
Now more than ever, we need ambitious and wholesale audit reform to ensure firms operate responsibly, build economic confidence and underpin stable growth.
