Oh, the irony! A recent court ruling found an audit opinion to be immaterial.
In my latest article in Accounting Today, I explore what this means for the accounting profession: https://www.accountingtoday.com/opinion/do-audit-opinions-even-matter-anymore
In the words of the Second Circuit Court of Appeals, the audit opinion was "so general" that "a reasonable investor would not depend" on it.
This is a big deal for CPAs, who have always placed a high value on our work as auditors of public companies – "Defenders of the Capital Markets," if you will. But this ruling suggests these opinions might not be as critical as we think.
Here's the situation:
Over many decades, audits have become a standardized pass/fail test, focusing less on auditors' judgment and more on checking boxes.
Here's the result:
Audit opinions have become commoditized. Auditors must compete on price, and therefore, salaries have stagnated. Audit quality has declined.
Is it any wonder that only 25 percent of accounting majors graduate? The rest switch to other majors. They may not do it directly because of this problem, but the symptoms show up in the workplace environment and culture, which is easy to see on social media.
We talk a lot in the accounting profession about how Gen Z wants more meaningful work. Instead of promoting feel-good but meaningless concepts like ESG, how about we make audits matter again?
I'd love to hear your opinion in the comments. It matters to me!
