Audit industry veteran flags major gaps in auditor training

The training and requirements to become a registered company auditor by ASIC are in need of an overhaul, with many younger auditors entering the profession lacking important skills and experience, according to Roslyn Buzza, registered company auditor and chartered accountant.

Buzza, who has decades of experience as a company auditor, said the 3,000 hours of work required to become registered as an auditor meant that only a select number of firms were able to provide this type of supervision.

In some cases, the requirement was also a barrier to professionals wanting to enter the profession.

“If you have a smaller firm with two or three partners, you’re not likely to have the volume of audit clients to be able to provide an employee with 3,000 hours over five years,” she said.

This meant that the overwhelming majority of professionals planning to become registered were employed by the large audit firms.

The audit divisions in these large firms operated as a pyramid structure where a large number of staff were supervised by a small number of directors who are actually auditors.

“I spent my first four years at KPMG, which was previously known as Peat Marwick, and one auditor partner might actually be supervising 100 staff. It’s a bit like an army where you’ve got a few generals at the top and thousands of soldiers at the bottom,” she said.

Large audit firms also predominantly provided audit services for large multinational companies, which meant limited opportunities to gain experience auditing smaller companies.

“Someone working at a global firm for four years can certainly clock up the necessary hours, but do they have the practical experience needed for small jobs?” she said.

“If you’re at a global firm you’re going to be working on companies listed on the New York Stock Exchange and other places across the world, but you’ll rarely see an Australian-based, Australian-owned company.”

The structure of the large audit firms also meant professionals wanting to become auditors at these firms were missing out on more hands-on training from experienced auditors.

"If you're working for a firm that is part of one of these international networks, you're working to a prescribed format of doing your job and there's no ability to access those people who can spot the obvious errors."

"It's just not there. If you've got layers and layers of people above you in a global firm, then the track record for spotting obvious problems [won't be as good].

“There are so few places where someone can be employed to gain those 3,000 hours in a way where someone experienced is teaching them in a more hands-on way,” she said.

The training offered by major professional bodies was also lacking training on vital personal skills for the job.

"It's very focused on the accounting standards, yet the personal skills that you need rarely exist in those offerings," Buzza said.

"[For example], training on how to interview someone, there's nothing included on that. You have to look at some of the legal professions to find a short course on that, but for an audit manager or audit partner, that's a critical skill."

Buzza said this made hands-on supervision of someone wanting to become an auditor even more important.

"[However], you just don't get that in a medium or large firm where you may have a supervisor who's only two or three years older than you are and just working through a program," she said.

Buzza said a review was also needed into some of the barriers to entering the audit profession such as the requirement to have continuous employment to become a registered auditor.

"If you have a six-month break to go overseas, for example, then you've broken that continuous employment requirement."

The Australian National Audit Office is currently conducting a review into ASIC's regulation of registered company auditors, including ASIC's effectiveness in the licensing of registered company auditors.

With many of the experienced company auditors retiring or close to retiring, Buzza said something needed to be done urgently to both increase auditor numbers and also improve the quality of training they are receiving.

"There's roughly only 3,400 registered auditors left in the country, and a lot of us would have liked to have retired by now, but if we did, there'd be no one to train the people aspiring to get that qualification now.”