At the point at which this month’s issue of Accountancy lands on your desks, a general election could well have taken place in the UK. Whatever the result of that election, the challenges facing the incoming administration will be immense.
Tackling the deficit in public finances will require bold policy initiatives and a willingness to take unpopular decisions. The key challenge will be to ensure that the fragile economic recovery that is beginning to materialise is not jeopardised.
Last year, we undertook research into the extent to which the banking sector was lending to small business. The issue could not be more important in terms of our economic recovery. Getting access to cheaper capital is a necessary prerequisite for long-term growth.
The audit profession has a key role to play here. Providing independent verification of the financial health of UK plc increases investor confidence, which in turn brings down the cost of capital.
This is not just true of the listed company sector. Many owner-managed companies, even below the statutory audit threshold, depend on an audit in order to secure funding.
Our Financial Services Faculty has recently published research on market expectations on audit arising from the financial crisis, which we will be sharing with the incoming administration.
Certainly there are things that the audit profession can do differently. For example, there is scope for greater dialogue with regulators on systemic risk issues. At the same time, we must not forget the fundamental importance of the audit to economic activity. Without it, there would be greater opacity, volatility and uncertainty – none of which are conducive to a return of economic confidence.