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Audit committee chairs are “particularly alert” to quality during the auditor tendering process, with mandatory tendering being seen as an opportunity to encourage innovation by prospective auditors, according to independent research commissioned by the Financial Reporting Council.

The research, conducted by YouGov, was based on in-depth interviews with ACCs discussing how they carry out their role.

The FRC said there were a range of different views expressed on audit quality amongst the ACCs interviewed. It found that some ACCs “continue to find it difficult” to differentiate audit quality from the quality of service provided by their audit firm.

In common with findings from last year, it added there were also “relatively few” indications of regular challenge by ACCs of audited companies’ senior management.

The research also found that auditors have adapted quickly to the challenges posed by the pandemic. There are emerging signs that the move to remote working has been accompanied by a shift in the relationship between the ACC and the lead audit partner, such that it has become more formal, and interactions have become more structured.

Mark Babington, FRC’s executive director of Regulatory Standards, said: “It is vital that audits of public interest entities are conducted to a high standard and Audit Committees and their chairs have a key role to play in ensuring this happens.

“Today’s research confirms that audit committee chairs understand the importance of high-quality audit, and that this insight was used to good effect to deal with the heightened challenge and uncertainty caused by the pandemic. Nevertheless, some ACCs commented that it can be a challenge to differentiate audit quality from the quality of service provided by the auditor

He added: “As the FRC transitions to ARGA we will take these findings into account as we develop the means of delivering high standards of audit, reporting and corporate governance

Lewis Catchpole in Accountancy Today

Nearly half (49%) of UK accountancy firms are facing “huge blows” to their growth amid an ongoing skills and salary war that is “raging” across the sector, according to new research from IRIS Software Group (IRIS)

It comes as KPMG found that many firms have been “hit hard” by labour shortages, with many forced to turn work away due to a lack of staff, while IRIS’s own research found that 32% of firms cite the current skill set of talent in their firm as a barrier to growth in the next 12 months writes Heather Sandlin in Accountancy Today

IRIS surveyed British accountancy firms to help “uncover the state of the profession as demands on their time increase as they play a vital role in helping businesses get back on their feet and boost the economy”. 

Its research found that nearly one in five firms did not want to grow any fee-paying areas over the next 12 months, however, with 23% citing a lack of time and skill to market the business within the firm as the main reason why they aren’t looking to expand. 

Jim Scott, MD for accountancy at IRIS, said: “While technology is vital to driving growth, it will never replace the insight and guidance an accountant can provide businesses. They are the forgotten heroes of the pandemic. 

“Yet the number of firms being affected by the skills shortage is eye opening and this is only being exacerbated by the “Great Resignation”. It is truly an employee’s market. The industry must do more to support firms in listening intently and working with teams to create a culture with flexibility and hybrid working at its heart to attract and retain the best talent.”

Edited

Tel Aviv has been named as the most expensive city in the world to live in, as soaring inflation and supply-chain problems push up prices globally.

The Israeli city came top for the first time in a survey by the Economist Intelligence Unit (EIU), climbing from fifth place last year and pushing Paris down to joint second with Singapore.

Damascus, in war-torn Syria, retained its place as the cheapest in the world.

The survey compares costs in US dollars for goods and services in 173 cities.

The EIU said the data it collected in August and September showed that on average prices rose 3.5% in local currency terms – the fastest inflation rate recorded over the past five years.

Transport has seen the biggest price increases, with the cost of a litre of petrol up by 21% on average in the cities studied.

Tel Aviv’s climb to the top of the EIU’s World Cost of Living rankings mainly reflected the soaring value of Israel’s currency, the shekel, against the dollar. The local prices of around 10% of goods also increased significantly, especially for groceries.

The survey found Tel Aviv was the second most expensive city for alcohol and transport, fifth for personal care items, and sixth for recreation.

Tel Aviv’s mayor, Ron Huldai, warned in an interview with the Haaretz newspaper that rising property prices – not included in the EIU’s calculations – meant the city was heading towards an “explosion”.

“Tel Aviv will become increasingly more expensive, just as the entire country is becoming more expensive,” he said.

“The fundamental problem is that in Israel there is no alternative metropolitan centre.

In the United States, there is New York, Chicago, Miami and so on. In Britain, there’s Greater London, Manchester and Liverpool. There you can move to another city if the cost of living is too onerous.”

Last year, Paris, Zurich and Hong Kong shared joint first place in the EIU’s survey. Zurich and Hong Kong were fourth and fifth this year, followed by New York, Geneva, Copenhagen, Los Angeles and Osaka.

Tehran climbed the most in the rankings, jumping from 79th to 29th, as US economic sanctions continued to cause shortages of goods and rising import prices in Iran.

The EIU said the rankings continued to be sensitive to shifts brought about by the coronavirus pandemic.

“Although most economies are now recovering as Covid-19 vaccines are rolled out, the world’s major cities still experience frequent surges in cases, prompting renewed social restrictions. In many cities this has disrupted the supply of goods, leading to shortages and higher prices.”

It added: “Fluctuating consumer demand has also influenced purchasing habits, while investor confidence has affected currencies, further fuelling price rises.”

The EIU said it expected price rises to moderate over the coming year as central banks cautiously increased interest rates to stem inflation.

Source BBC