The life of a junior auditor can be quite challenging. The hours are long, the job can be monotonous, and the pay is not keeping up with inflation. This unfortunate situation makes it difficult for auditing firms to attract and retain top talent, which is crucial for their important public service role.
PwC, a prominent accounting firm, blames the regulator’s practice of publicly criticizing underperforming auditors for the unattractive employment proposition in the industry. However, Jan du Plessis, the chair of the Financial Reporting Council, believes that tough standards are necessary, and the solution lies in offering higher pay to talented individuals.
It is true that top students are increasingly motivated by salary when choosing their career path, as indicated by an annual survey conducted among Oxford University undergraduates. The salaries offered by accounting firms have not kept up with the times. Even after recent increases, new graduates joining a Big Four firm in London might earn £32,000-£35,000 per year, according to the ICAEW. In contrast, trainee investment bankers and top lawyers earn double that amount.
Accountancy firms may argue that they provide valuable training for graduates pursuing their Chartered Accountancy exams. However, it is worth noting that these firms often lose their newly qualified auditors to banks and companies that require their expertise.
In this case, higher pay might be part of the solution. The salary for newly qualified auditors at major firms has struggled to keep up with inflation. Although the average salary increased from £50,000 to £60,000 between 2016 and now, the real value of the salary has actually fallen to £45,000.
One positive outcome of this situation is that audit firms are now hiring a more diverse group of candidates to fill their vacancies. They are increasingly considering graduates with lower class degrees. Around 15% of members of the Institute of Chartered Accountants of England and Wales entered the profession directly from school. This broader approach to talent scouting does not necessarily mean a decline in standards; it can lead to a more diverse and inclusive workforce.
Auditors play a vital role in ensuring the accuracy and transparency of companies’ financial disclosures. As such, companies and their investors must discourage auditors from overpaying themselves while underpaying the junior auditors who do most of the work.
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