Tim Ryan, who was exposed to financial services and auditing as he rose to become PwC LLP’s U.S. chairman, wants to keep the firm’s audit, tax, and consulting operations together.
In fact, he wants to expand the firm’s reach, offering clients audit services in areas like data privacy and food security.
“A multidisciplinary firm is the best way to meet our obligations to our stakeholders including the capital markets. A multidisciplinary firm, from our perspective, is the best way to deliver audit quality,” Ryan told Bloomberg Tax.
His comments come amid a global debate over the role of auditors and the structure of audit firms. The industry came under fire after a series of corporate collapses in the U.K. and South Africa raised questions about the impartiality of auditors and the lack of competition for audit services.
Ryan, 53, recently sat down at his New York office for a wide-ranging interview with Bloomberg Tax. Topics included the future of audit, challenges facing business units, and critical audit matters that will be included in financial statements starting later this year. He also acknowledged auditors face an “expectation gap” and need to do a better job explaining their role in the capital markets.
Investors and other stakeholders in the U.S. also have raised concerns about the structure of the firms and the rise of their consulting businesses in the years since the 2002 Sarbanes-Oxley Act limited the type of advisory work provided to audit clients. The trio of services fuels the multi-billion-dollar business of the Big Four.
Ryan said that PwC auditors rely on the expertise of their tax accounting colleagues, for example, to help verify tax expenses and liabilities and how the benefits of the 2017 tax law should be reported on their clients’ financial statements. And cybersecurity professionals lend advice to the auditors on controls needed to secure financial records.
The firm has struck an effective balance among the three business lines. And Ryan has no plans to change that.
Instead, he sees opportunities to expand the firm’s assurance business beyond auditing financial statements. His goal: Anytime a business needs independent, third party validation, PwC would be there to help fill what Ryan described as the trust gap.
“If we as a profession, and the leaders of the profession, if we don’t go after those opportunities, that will be a big miss on our part,” he said.
The firm already backstops companies to make sure that their data privacy practices work as intended. That type of assurance work is limited at this point, but Ryan believes as more companies look to protect their brands—and the trust and goodwill attached to those brands—work related to data permissions and usage will grow.
But the firm has to make a sales pitch of its own—informing potential clients of what it can offer beyond the financial audit. And it has to invest in its people and technology so the firm can meet those business needs.
“The challenges to get there are making sure we do our job well today. We continuously have to deliver assignment after assignment,” he said. “We have to deliver high audit quality. And you can never let that stray away from anybody.”
Laying that foundation to grow the business beyond auditing will be part of his legacy at PwC, Ryan said.
“I view it as a long game. I view it as investing in the profession.”
In the meantime, auditors will have a new tool at their disposal to reinforce why they should be trusted and remain relevant—a more detailed auditor report included in annual financial statements
The new report framework will let investors see where auditors focused their time and how they reached conclusions on the most complex accounting. And it will help narrow the gap between investor expectations and the role of auditors in ensuring reliable financial reports, Ryan said.
“There’s no doubt there’s an expectation gap out there. And we have a responsibility to make sure that we are proactively talking about the role that we do play and the role that we could play.”
To read more from Financial Accounting News pleaseOR Request Trial