If I want a legal or medical opinion I need a certified lawyer or physician. Auditing is notably different. Audit committees accept audit reports from people who have no professional qualification every day. Which leads me to wonder, why does this not trouble them? Why are they willing to read an audit report from someone with no qualifications? Independent directors are not managers and cannot impose themselves on the company; they need objective resources to help them. Why should they not demand certified professionals?
I hear there is a trend today to hire “non-traditional” auditors by appointing as Chief Audit Executives people who have made their mark in other areas. Perhaps they are successful lawyers, business unit managers or chief compliance officers. I hear some people who I respect in the professional world saying that this is not a bad thing. It brings diversity, more business knowledge and better communication with business leaders with whom these people can presumably empathize more. There are lessons for us here. For some reason, it is easier for a business unit manager to “pick up” audit skills than it is for a professional auditor to develop “business skills”. Of course, this can always be true for any one individual, but I am skeptical that there should be some inherent reason.
I find it dismissive to assume that auditing knowledge does not count. It took me three years of hard study to qualify as a Chartered Accountant. I studied law, statistics, auditing, tax, external reporting and financial management. I put those things into practice and I needed to have qualified accountants certify that I was in good standing. I fully understand that this does not make me a “Chief Anything Executive”; that requires further skills on top. But if you would replace “Anything” with the word “Legal” in that sentence would you not at the very least expect the individual to be qualified in the law?
Remember when the trend was to hire so-called “non-traditional” CFOs? Sometime in the 1990s accounting and controlling went out of favor when looking for a CFO and instead we looked for deal-makers and possibly even CEOs-in-waiting. These people brought “business savvy” to the dull world of accounting. They also heralded an era of big corporate malfeasance that has brought us back around to appreciate the technocrats a little more.
I am not arguing for dull technocrats and certainly not for single-skilled executives. The Chief Audit Executive must hold his or her own with all the other executives. If not, you have the wrong person in the job. [Hint: to those Audit Committee members at companies who put the level of the Chief Audit Executive two or three steps below the layer of Executive management, it's probably because you don't actually have a Chief Audit Executive] We need to re-think this. The profession needs to be clearer about what is an acceptable standard – define who can and who cannot sign audit opinions. Just like our friends in the external audit world. Then, we need to be transparent who is and who is not qualified. Letters after your name. Sanctions for those who fail. Let’s not expect others outside the profession to take this seriously until we do so.