“… In all of the instances I have dealt with, there have been at least two reasonable positions that could be taken, one of which involves less disruption to the draft accounts than proposed by the auditor. In such circumstances, you would expect the auditors to be finding themselves a comfortable seat on the fence, from where to take in the admirable views available on both sides. Not standing on one side throwing stones. …
… Threats of audit qualification are usually fairly empty. They rely on the auditor being able to summarise their case against the authority succinctly, definitively and with quantification in the audit report and on the matter in hand being truly material (ie, that it might influence a decision to be taken by a user of the accounts). Most of the firms will also require qualified audit reports to be approved by a senior technical panel, so they are not at the discretion of the individual auditor.
Many accountants will at this point settle for what they judge the easier option and make the changes demanded. But there can be greater advantage in pushing back, asking the auditors to:
explain why your approach is not acceptable, rather than just different from theirs
provide comprehensive technical support for any counterarguments they put
be clear that the issue might have a properly material impact.
Sometimes the view of the auditor will need to be accommodated. But on many occasions issues are resolved simply by persuading the auditor to appreciate the authority’s approach to an area where there is room for differences of opinion.
So, two key messages. Auditors: retain your independence by avoiding dogmatic demands and engaging directly with what the authority has done. Accountants: don’t believe that an argument is necessarily stronger because it comes with the promise of a clean audit opinion.”