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The Challenges Faced by Auditors in Today’s Industry

The Struggles of Young Auditors

Being a young auditor in today’s industry poses numerous challenges. The demanding nature of the work, long hours, and reputational risks make it an exhausting profession. However, one of the major concerns for young auditors is the declining real pay. This decline in salary is detrimental to the industry as it fails to attract and retain top talent.

Pointing Fingers: The Role of Regulators and Accounting Firms

PwC, one of the Big Four accounting firms, has pointed the finger at regulatory practices as a factor contributing to the sleazy audit job offers. The Financial Reporting Council’s propensity to appoint and shame auditors has been criticized by Jan du Plessis, chairman of the council. Du Plessis emphasizes the need for strict standards and advocates for higher salaries to attract talented individuals.

Motivating Factors for Future Auditors

An annual survey of Oxford undergraduates reveals that top students are increasingly motivated by salary when considering their future careers. Unfortunately, accounting firm salaries have not kept up with the times. Even after recent salary hikes, starting salaries for recent graduates joining a Big Four company in London range from £32,000 to £35,000 per year, whereas investment bankers and top lawyers can expect double that amount.

The Need for Higher Salaries in the Accounting Industry

Inflation and the Struggle to Keep Pace

Newly qualified auditors at large firms have faced challenges in keeping up with inflation. The average salary of £50,000 in 2016 rose to £60,000, according to recruitment specialist Hays. However, when adjusted for inflation, the real salary fell to £45,000. This discrepancy highlights the need for higher salaries to attract and retain talented auditors.

Expanding Networks and Diversifying Talents

One potential benefit of the salary limitations is that accounting firms are motivated to expand their networks and fill vacancies. Employers are now considering graduates with lower degree classes, opening up opportunities for a more diverse cohort. This broader approach to talent scouting does not necessarily mean lowering standards, but rather creating a workforce with a wider range of experiences and perspectives.

The Role of Auditors and the Importance of Fair Compensation

Verifying Financial Information and Ensuring Quality Assurance

Auditors play a crucial role in verifying the accuracy and reliability of companies’ financial information. However, it is essential for firms and investors to play their part in ensuring fair compensation for auditors. Overpaying or underpaying young auditors can negatively impact the quality of their work and ultimately the trust stakeholders have in financial reports.

An Engaging Piece: The Future of Auditing Salaries

As the accounting industry grapples with the challenges of declining salaries and the need for top talent, it is crucial to consider the potential solutions and future outlook for auditors. Here are a few insights to ponder:

1. The Value of Investing in Auditors

In today’s complex business landscape, the role of auditors has become increasingly vital. As financial regulations continue to evolve, auditors are tasked with ensuring compliance and transparency. Investing in auditors by providing competitive salaries not only attracts top talent but also enhances the quality of audits and strengthens public trust in financial reporting.

2. Addressing the Perception Gap

One potential barrier to attracting the best talent is the perception of auditing as a less glamorous or exciting career compared to fields like investment banking or law. Accounting firms need to actively work on improving the image and raising awareness of the meaningful contribution auditors make to the functioning of businesses and the overall economy.

3. Embracing Technological Advancements

The accounting industry is experiencing rapid technological advancements, with automation and artificial intelligence playing an increasingly prominent role. Embracing these technologies can alleviate some of the burdens placed on auditors, allowing them to focus on higher-value tasks and adding strategic insights to their work. Additionally, the use of advanced technology can potentially justify higher salaries, reflecting the specialized skills required to navigate these innovations.

4. Collaboration with Educational Institutions

Collaboration between accounting firms and educational institutions can help bridge the gap between classroom learning and real-world application. By working closely with universities and offering internships or practical training programs, accounting firms can attract young talent and nurture future auditors. Such initiatives can also provide an opportunity to highlight the competitive salaries and growth opportunities available within the industry.

Conclusion

The challenges faced by auditors in today’s industry, particularly the declining salaries, require urgent attention. To attract and retain top talent, accounting firms must address this issue by offering competitive compensation packages. Fair and competitive salaries not only benefit the auditors themselves but also contribute to the quality and integrity of financial reporting. With the right measures in place, the future of auditing can be a bright and rewarding one.

Have mercy on the life of the young auditor. The work is a bit tiring. The hours are long. The reputational risks are great. And pay, as the abacuses will have understood, is declining in real terms. This will not help attract and retain top talent, which is a shame given auditing’s important public service role.

Who is responsible for the sleazy audit job offer? The Big Four accounting firm PwC has pointed the finger to the regulator’s propensity to appoint and shame auditors. Jan du Plessis, chairman of the Financial Reporting Council, believes that standards must be strict and that the solution is pay more for talent.

Du Plessis is right. Top students are increasingly motivated by salary in choosing their future career, says an annual survey of Oxford undergraduates. Accounting firm salaries are stuck in the past. Even after last year’s hikes, recent graduates joining a Big Four company in London could earn £32,000 to £35,000 a year, according to industry body ICAEW. Investment bankers in training and top lawyers get double.

Accounting companies might argue that they train graduates up to the Chartered Accountant exams, which is a big plus. Indeed, another bottleneck for the industry comes when newly qualified auditors are targeted by banks and companies that need their expertise.

Again, money could be part of the answer. The pay of newly qualified auditors at large firms has struggled to keep pace with inflation. The £50,000 average salary in 2016 rose to £60,000, according to recruitment specialist Hays. In real terms, however, it fell to £45,000.

If there’s one silver lining to all this savings, it’s that accounting firms have to expand their networks to fill vacancies. Employers more often consider graduates with lower degree classes. Around 15% of members of the Institute of Chartered Accountants of England and Wales entered the profession directly from school. A broader approach to talent scouting doesn’t necessarily mean lowering standards. It could produce a more diverse cohort.

Auditors have a vital role to play in verifying the veracity of companies’ financial information. Firms and their investors have their own quality assurance role: discouraging audit partners from overpaying and underpaying the young people who do much of the work.

Lex’s team is interested in hearing more from readers. Please tell us whether you agree with our argument or not in the comments section below