Accountants should work more closely with academia. That was my key takeaway from a trip to Edinburgh last week for the British Accounting and Finance Association meet. It is clear that the academics welcome input from practitioners and I found myself volunteering to share some of my experiences with their students. And I got the impression that lecturers would welcome much more practical input at all stages of research and in all aspects of their work.
Take auditing. The conference heard about some of the research projects under way. It struck me that a lot of the research is reactive. For example: one project looked at one finding from one audit regulator. I felt that was a missed opportunity to look at broader contributing factors.
A significant challenge for investors and researchers is the lack of consensus on audit quality indicators (AQIs). Researchers aim to link audit quality to metrics like cost of equity, cost of debt, and company performance, based on the theory that robust audits lower capital costs. Without accepted AQIs, proxies such as audit firm size or market share are used, often based on equity value or the number of audits. However, these proxies can mislead audit users. Researchers acknowledge these limitations but note the necessity of using available measures.
Practitioners should shoulder some of the blame here. There have been long-running debates within the profession about AQIs. Just about the only thing we can agree on is that it is difficult. Oh, and that we don't agree! That needs to change or someone else will fill the void. And that could well be a result that we find unsatisfactory, or worse is misleading for investors and other market participants.
For me tax also seems to be ripe for research. In my view the tax profession is facing similar pressures now that the audit profession was facing 15 years ago – public criticism, trust on the wane, professional standards under scrutiny and self-regulation being questioned. In contrast to the result for auditors I don't see many calling for independent regulation of the tax profession. At least, not yet. That could change if there are one or two more examples of what is deemed unacceptable behaviour in the court of public opinion.
Collectively practitioners must help the academic community. We should explain the pressures we and our clients are facing today. We should explain the practicalities behind those live issues. We should demonstrate where we believe academic research could contribute to a step-change in the public benefit attributed to the work of the profession.
Individually, we should support student development by sharing our stories of what it is like at the coal face. I have been remiss in not doing so before. Have you?
Nick Jeffrey is director, global public policy at Grant Thornton
