Sheer passion for accounting and auditing has helped Roger Simnett FCPA rise to the top of his profession.
At a glance
- Roger Simnett FCPA is chair of the AUASB in Australia, and has more than 25 years of experience in a number of standard-setting bodies.
- Amid challenging times for the auditing profession, Simnett says accountants play a key role as “credibility enhancers”.
- Simnett sees integrated reporting as a strong tool in rebuilding organisations’ reputations while assisting in efficient resource allocation.
A sleepy farm just outside Melbourne with kangaroos hopping across paddocks seems an unlikely launch pad for an international career in auditing and assurance.
The locale set the tone, though, for Roger Simnett FCPA, whose working-class parents instilled in him from an early age the notion of strong family, work and social values as he grew up in rural Hurstbridge, about 30km outside the city.
“They’ve had a significant impact on the ideals I live by. There was a lot of emphasis on social justice and fairness and treating people fairly,” says Simnett, chair of the Auditing and Assurance Standards Board (AUASB) in Australia, and scientia professor at University of New South Wales (UNSW) Business School.
He is renowned as a leading international auditing researcher who draws on more than 25 years of experience in various standard-setting bodies, including the AUASB, the International Auditing and Assurance Standards Board and the International Integrated Reporting Council working panel. The principles he learned from his parents decades ago are never far from his mind as he helps the auditing profession navigate arguably the toughest period in its history, as a high rate of perceived audit failures means that the spotlight is squarely on the profession.
Having recently been inducted into the Australian Accounting Hall of Fame for his impact on accountancy, and as a recipient of the Order of Australia for distinguished service to accountancy, there are few people better qualified than Simnett to help guide the profession.
Audit: a matter of trust
The corporate world has been rocked by numerous scandals recently, including revelations at the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry in Australia, of corporate law breaches and unconscionable behaviour. In August, the Parliamentary Joint Committee on Corporations and Financial Services announced an inquiry into the regulation of auditing. In such an environment, Simnett admits that the auditing and assurance profession, among others, is at a pivotal point.
“There is a lack of trust in society generally, and that’s reflected in auditing, too,” he says. “Auditing is basically a trust profession, so if we lose the trust of society, then we lose the value of the audit.”
Accountants have a key role to play in rebuilding trust by ensuring robust financial reporting and acting as “credibility enhancers” for organisations, which need to “do the right thing because it’s the right thing to do, not because they need to or are told so”.
How will that play out? On the accounting front, businesses and organisations must accurately report what they are doing and outline how they are turning around their reputations. “The role of auditing is to make sure that these disclosures are credible so we do rebuild trust,” Simnett says.
“I see [as auditors] that we do have a pivotal role in society, and possibly a broader role than we’ve been historically used to.”
Through his leadership of the AUASB, Simnett, who has also held visiting professorial appointments at institutions including Boston College, King’s College London and Maastricht University, is committed to helping to develop and implement appropriate standards that both reflect and adapt to changing societal needs and norms, and which do not stand in the way of innovative auditing practices.
"I see [as auditors] that we do have a pivotal role in society, and possibly a broader role than we've historically been used to."
Despite criticism of integrated reporting, he sees it as one of the accounting tools that can be used to rebuild the reputations of organisations. Integrated reporting goes beyond traditional company financial reporting requirements to encompass all aspects of a company’s business operations – financial, manufactured, intellectual, human, social and relationships, and natural.
Simnett, who says integrated reporting can also assist with the effective allocation of resources, likes the framework “because it gives us a coherent approach as to how we deal with all these issues”.
“As an underlying concept I am a strong believer in integrated reporting.”
In response to some political and business leaders who dismiss integrated reporting as costly and time-consuming, Simnett comments: “The approach I see in Australia from politicians is that they pick up a pet issue, be it modern slavery or international taxation, and they deal with it on an issue-by-issue basis as distinct from a whole. I think integrated reporting has the ability to deal with the whole – so it’s a good concept.”
The big issues in audit and assurance
Disruption from technology and big data; broader reporting standards; more complex auditing standards; regulatory demands for improvements in audit quality – there is no doubt auditors are facing considerable challenges as they seek to regain public trust.
The AUASB has a crucial role in helping the sector deal with some of the most difficult auditing and assurance issues it has ever faced. Simnett relishes his job and finds it immensely rewarding.
Among other tasks, he has been asked to head up an International Auditing and Assurance Standards Board (IAASB) working group that will review the need for new standards or guidance for audits of less complex entities (LCEs), such as small companies, charities and sporting groups. There is growing recognition internationally that auditing standards are not fit for purpose for audits of LCEs, and that if auditors of LCEs face overly complex auditing standards, their clients may not be able to afford audits.
According to Simnett, auditing standards have become “much more complex and much more procedures-based rather than principles-based”. While that may suit regulators, it could come at the cost of smaller entities.
“We have a real challenge in hand. Our job is to work out how we can go about addressing these issues so that auditors of the small charities, the small sporting clubs, the small companies can do the most efficient and effective audit within a reasonable cost basis.” Simnett hopes the review will be completed in time to mark the end of his three-year term on the IAASB so he can point to “something that I have actually progressed for the benefit of the profession and society”.
The broader criticism that financial reports have become longer and less useful has been articulated by experts such as Baruch Lev, professor of accounting and finance at New York University Stern School of Business. In his book The End of Accounting and the Path Forward for Investors and Managers, Lev suggests that financial reports have largely become an exercise in compliance, as opposed to an information-sharing activity that reflects strengths such as a great brand or unique business processes such as Amazon’s and Netflix’s customer recommendation algorithms.
Simnett says the issue is a conundrum because different stakeholders will always want different information, and eliminating one set of information will always draw criticism.
“[Reports] are still serving a purpose as an accountability document and decision usefulness for some, but they are becoming longer and more complex. People are digesting information in a different form these days and not everyone is needing the level of detail contained in reports for the decisions they need to make. We have to be adaptive in the current environment or else we will become irrelevant.”
Then there is the so-called “audit expectations gap” – the difference between what users expect an audit to deliver and what it actually entails.
Simnett notes that the gap can be broken into many categories, such as a performance gap, a standards gap, a communications gap and an unrealistic expectations gap.
“There are different parts of the gap and we have to be adaptive as to what society is demanding and expecting. Sometimes, that’s not easy to identify.”
Simnett says the key in the future will be to provide information in different forms. He adds that while it is crucial for auditors to address the various gaps, the profession must remain viable.
“You can close the gap, but this comes at a cost, and who is going to pay for the cost? That’s a real consideration. For auditing to be viable, we have to look at the cost benefit of the particular processes.”
The Australian way
Auditing controversies in the UK have led to calls for the Big Four accounting firms’ consulting work to be legally separated from their auditing businesses. The theory is that such a move could renew the focus on independence, albeit potentially at the expense of competence.
Simnett acknowledges the international debate, but warns against a knee-jerk response from Australian regulators.
“I don’t want debates to be driven by something that is going on in a particular country overseas,” he says, adding that in many cases, the calls for change could be coming from a parliamentarian with a broader agenda.
“We need to ensure in Australia that the debate runs on evidence that is relevant for Australia, and that these issues do not just come across our desk.”
Clearly, he sees it as part of his duties through the AUASB to do just that.
“I hope we can stand back and evaluate the evidence objectively in Australia, and that’s part of my role on the auditing standards board.”
The AUASB has welcomed the parliamentary inquiry into the regulation of auditing, saying it supports all activities that promote continuous improvement in audit quality, transparency and professional conduct across the auditing profession.
As to whether “independence” or “competence” is the most important trait for auditors, Simnett believes it is a juggling act.
There must be appropriate objectivity and independence, of course, but it should not come at the expense of the quality of the audit.
“My concern is that the regulatory focus tends to be much more on independence than it does on competence, and we have to make sure we’ve got the right balance there.”
Advice for younger CPAs
It is no exaggeration to suggest that Simnett could well have been lost to the auditing profession, simply because of a lack of accounting classes in his high school days. His obvious maths talent as a boy and the coercion of about six other students convinced the school to introduce accounting as a subject, allowing Simnett to stop “meandering his way through school”, as he puts it, and begin his journey as an accounting and auditing specialist.The man himself puts his career success down to a series of chance encounters.
Leaving school to do an honours degree at Monash University, he came under the tutelage of Professor Graham Peirson, an eminent accounting and finance academic who influenced thousands of students over the years and encouraged “a standard-setting streak” in Simnett that laid the platform for his career.
“I was very lucky to run into that learned gentleman at that pivotal stage of my career,” Simnett says.
Other mentors followed, including Professor Ken Trotman, the former head of the School of Accounting at UNSW, who advocated a strong work ethic and “doing things that you love to do” in order to make a contribution to the accounting profession and society. Simnett took Trotman at his word and encourages others to consider auditing work.
Auditing, he argues, is a “public interest profession” that is a great training ground for business and allows CPA Australia members to make a difference. Despite suggestions that digital disruption could wipe out future auditing jobs, he is confident that a role will remain for smart, trustworthy and conscientious auditors.
"Make sure you're doing what you enjoy and then make sure you enjoy what you're doing."
“Auditing is really a people business and it’s not going to be replaced by bots in the near future. It really has a viable and vibrant and evolving history.”
Most of all, Simnett encourages young business aspirants to pursue a career they love because there will no doubt be challenges and tasks that test their resolve.
“Make sure you’re doing what you enjoy and then make sure you enjoy what you’re doing,” he says. “It makes life so much easier in this current and busy lifetime to really like what you are doing and feel you are contributing to society.”
While he admits his own work-life balance has suffered because of a hectic professional workload, Simnett would not have it any other way.
“I’m lucky that with everything I do, I love it. It’s not real work for me … This is an international career and I often think, ‘Gee, how lucky have I been’.”
CPA Library resource:
The End of Accounting and the Path Forward for Investors and Managers (eBook)
Skills I draw on every day
Although the emphasis for auditors is often on technical skills, Roger Simnett says the profession is really a people’s business in which success may not be achieved without finely tuned personal skills. “And make sure you always treat people as you’d like to be treated yourself.”
Simnett says that, after ascending to a leadership or senior role, executives should try to leave a legacy through the development of others, rather than just focusing on personal advancement. “Always look at identifying opportunities for others. That’s very fulfilling.”
Decision-making and analytical skills
Always get the best evidence so you can make the best decisions, Simnett advises. “As chair of a board, for example, make sure you always give people the ability to express their views and make sure you’re always good at weighing up the evidence that is there.”