The article argues for shareholder choice on audit, with statutory safeguards where broader public interests apply.
Luca Briefs1/8
Audit opinion
Who should decide whether a company needs audit?
The article argues that shareholders should have a central role in deciding whether their company needs an audit.
Information gap
Audit adds credibility to financial reporting
Managers know more about the business than outside investors. Audit strengthens the credibility of the financial statements on which shareholders rely.
Quick check
Does company size alone tell us who needs audit?
Not reliably
The article argues that information relationships matter more than size. Where owners also run the business and have full access to records, the information gap largely disappears.
Proposed approach
Let shareholders vote at each annual meeting
The article proposes a vote at each annual general meeting on appointing an auditor for the upcoming financial year, aligning the decision with those who benefit from assurance.
Commercial demand
Stakeholders already ask for assurance
1Banks often require audited financial statements for loans.
2Investors typically demand audited accounts before investing.
3Joint venture partners may require audit for governance.
Public interest
“A purely shareholder-driven model cannot apply to all companies.”
The article supports retaining statutory audit requirements where broader public interests are involved.
