Who Audits the Auditors? – Auditing Accounting

Auditing is often portrayed as a cornerstone of trust in global finance. Independent accountants — the auditors — examine a company’s books and certify that the numbers are accurate. Investors, employees, and regulators rely on those certified financial statements to make crucial decisions, from buying stocks to approving loans. In theory, if the auditor signs off, the company’s accounts can be trusted. Yet in practice, the past twenty years have exposed serious gaps in this system. A series of spectacular corporate collapses has shaken confidence in audit reports. Big names like Enron in the United States, Satyam in India, Carillion in the U.K., and Wirecard in Germany share a common story: auditors giving a “clean” report even as fraud, mismanagement, or reckless accounting hid the truth. These failures raise a stark question: if auditors are meant to be watchdogs for the public, then who is watching the watchdogs?

This article takes a broad, international view of that question. We will review famous audit failures and the lessons learned, describe how audit oversight works (and sometimes doesn’t) around the world, and analyze deep-rooted challenges such as conflicts of interest and market concentration among big audit firms. We also look beyond corporate audits to public-sector oversight like government audit offices and Supreme Audit Institutions. Finally, we explore practical ideas for reform: from rotating audit firms to strengthening independent regulators. The goal is to clarify the current state of audit accountability, understandable for a general audience. As companies and economies become more global, ensuring auditors themselves are accountable has become a pressing concern for investors and policymakers everywhere.

High-Profile Audit Failures: Lessons from the Past

Over time, auditors have sometimes turned a blind eye to fraud and errors. History is full of examples where a lack of vigilance in auditing contributed to massive corporate failures. Here are some of the most notorious audit scandals around the world:

Enron (USA, 2001): Enron’s auditor, Arthur Andersen, signed off on financial statements even as the energy trader hid billions in debt through off-balance-sheet partnerships. When the fraud emerged, Andersen was found to have shredded documents, and the firm itself collapsed. This debacle led the U.S. Congress to pass the Sarbanes-Oxley Act in 2002, creating the Public Company Accounting Oversight Board (PCAOB) to regulate auditors.
WorldCom (USA, 2002): One of the largest frauds in history, WorldCom’s accounting team inflated profits by $3.8 billion. Arthur Andersen (again the auditor) failed to catch the manipulation. WorldCom’s collapse, coming on the heels of Enron, further shattered trust and demonstrated that auditors’ self-regulation was insufficient.
Parmalat (Italy, 2003): The food company Parmalat hid massive losses behind a web of fake bank accounts and sham transactions. Auditors from Deloitte and Grant Thornton overlooked the missing €1.3 billion until it was too late. Dubbed Europe’s “Enron,” the Parmalat scandal exposed weaknesses in Italian and international auditing and led to new EU audit rules.
Satyam (India, 2009): Called “India’s Enron,” Satyam Computer Services’ chairman admitted to a $1.5 billion accounting fraud. PricewaterhouseCoopers (PwC) was Satyam’s auditor and was heavily criticized for ignoring obvious red flags. The Satyam affair triggered major reforms in India’s corporate laws and stricter oversight of auditors.
Olympus (Japan, 2011): Japan’s Olympus Corporation hid over $1.7 billion in losses for decades by inflating the purchase prices of companies it acquired. When new management uncovered the scheme, the auditors (PwC) and former executives were charged. The scandal led to a crackdown on auditing standards in Japan, where auditors had traditionally been seen as far too trusting.
Toshiba (Japan, 2015): Japanese electronics giant Toshiba revealed that it had overstated profits by about $1.2 billion over seven years. Auditors from KPMG Azsa were accused of failing to question aggressive accounting by Toshiba’s executives. The incident prompted new guidelines on auditor rotation and independence in Japan.
Carillion (UK, 2018): Carillion, a major British construction and services firm, imploded with debts around £7 billion. Its auditor, KPMG, had repeatedly given clean audit opinions even as Carillion’s financial position deteriorated. Critics charged that KPMG had been too close to management. The collapse led the UK government to propose sweeping audit reforms, arguing that audit and governance failures had hurt subcontractors, workers, and pensioners.
Wirecard (Germany, 2020): Wirecard, a German fintech darling, turned out to be a massive fraud. Its auditor, EY, had signed off on the books for years even as regulators and journalists asked where €1.9 billion in cash was. In 2020, EY finally had to admit those funds never existed, and Wirecard collapsed. The case laid bare serious gaps in German oversight – not only did the auditor fail to verify deposits, but the financial regulator (BaFin) was accused of ignoring repeated warnings.
Luckin Coffee (China/USA, 2020): The Chinese coffee chain, listed on the Nasdaq, admitted that it fabricated about $310 million in revenue. Its auditor, EY’s China office, was accused of endorsing false audit reports. U.S. regulators fined EY for submitting misleading audit opinions. The scandal fanned global suspicion of Chinese companies listed abroad and led to proposals for stricter checks on foreign auditors.
Others: These headline cases are just part of a global pattern. In South Africa, retailer Steinhoff revealed a huge fraud in 2017 (audited by Deloitte). In Malaysia, the 1MDB sovereign wealth fund scandal involved multiple banks and auditors. Even mid-sized companies, banks in emerging markets, and charity organizations have seen auditors miss problems. Each failure followed a similar script: an auditor approved financial statements that later proved to be false or misleading.

These scandals share troubling themes. Auditors signed off on financial statements that later turned out to be dramatically wrong — often because they simply accepted the numbers provided by company management. In some cases auditors were accused of negligence or even complicity. In other cases, the audit rules themselves did not demand deeper investigation. The repercussions were immense: shareholders lost fortunes, employees lost jobs, pension funds were hit, and confidence in markets took a hit. In each case, regulators imposed fines, and lawmakers or stakeholders vowed to fix oversight. Yet every few years another case emerges. The lesson is clear: without stronger safeguards, similar failures can recur anywhere in the world.

Why Audits Fail: Causes and Conflicts

Why do auditors sometimes miss glaring fraud? There are several fundamental challenges in the audit process:

Reliance on Company Information: Auditors generally examine records and evidence provided by the company’s own accounting staff. They might confirm balances, inspect invoices, or test controls, but they seldom go beyond the provided data. If management conceals information or presents doctored figures, auditors may not detect it. In practice, auditors do not launch independent investigations akin to a detective’s search; they verify the numbers given to them.
Sampling and Limited Scope: Audits are not exhaustive checks of every transaction. Auditors sample accounts and test a subset of transactions. If a fraud is subtle or hidden in transactions outside the sample, it can slip through. Auditors also focus on material items — those that significantly affect the financial results. Smaller irregularities may not attract attention, even if they add up to a large fraud.
Incentive Misalignment: Audit firms are paid by the companies they audit. While professional ethics require auditors to be impartial, the business reality can create conflicts. A large client can pay millions in audit fees; losing that client could hurt a firm’s profitability and reputation. This creates pressure — sometimes subconscious — for auditors to stay on good terms with management. Critics argue that when audit firms also sell lucrative consulting services to clients, the incentive to challenge a client sharply is even weaker. Auditors depend on future work, so they may avoid rocking the boat over contentious issues.
The Expectation Gap: Investors and the public often believe an auditor will detect any fraud. In reality, auditing standards define an audit as providing only “reasonable assurance” that financial statements are free of material misstatement. Auditors themselves have noted in court that their responsibility is not to uncover every illegal act or error, only those that have a clear, material impact. This expectation gap means that when fraud is cleverly concealed, auditors may not see it as their duty to find it. The profession acknowledges it cannot guarantee perfection.
Self-Regulation and Culture: For much of its history, the auditing profession was largely self-regulated. Accountants set their own standards and peer-review systems. Critics say this arrangement can lead to leniency or complacency. Audit firms sometimes prioritize completing audits on time and keeping clients happy over being aggressively skeptical. In some failures, inquiries found that auditors simply accepted company explanations or relied on previous years’ audits without fresh scrutiny.
Audit Committee Oversight: Ideally, a company’s audit committee (composed of independent board members) should oversee the auditor’s work and probe difficult areas. In practice, audit committees vary in strength. Sometimes management has undue influence over the committee or selectively shares information, weakening its ability to challenge the auditor. If the board is not vigilant, auditors may not push back hard on management.

Together, these factors help explain why so many red flags have been missed. Auditors are expected to serve the public interest, but their actual incentives and the nature of an audit engagement create gaps. Investors and regulators have repeatedly demanded reforms because an audit system that leaves too much unchecked discretion in auditors’ hands can no longer be taken for granted.

Global Audit Oversight and Regulation

Audit oversight today is a patchwork of national regulators, professional bodies, and international organizations. There is no single global audit cop; instead each country or region has its own system, often supplemented by international standards and forums. The picture is complex:

United States: After Enron, the U.S. created the Public Company Accounting Oversight Board (PCAOB) under the Sarbanes-Oxley Act of 2002. The PCAOB is a private, nonprofit corporation overseen by the SEC, and its job is to register audit firms, conduct inspections, set auditing standards, and discipline errant auditors of public companies. Every year the PCAOB inspects audits (especially of large public firms) and typically finds serious deficiencies in a significant fraction of them. The SEC itself also prosecutes accountants under securities law. In addition, the American Institute of CPAs (AICPA) oversees audits of non-public companies, though without the same power as the PCAOB. Despite these measures, critics note that thousands of U.S. public companies are audited by only a few firms, and that the PCAOB still faces resource constraints and legal battles (for example, enforcing audits of Chinese companies).
United Kingdom: The Financial Reporting Council (FRC) traditionally set standards and inspected auditors in the UK, and could sanction firms. In 2022 the UK government announced it would replace the FRC with a new regulator (the Audit, Reporting and Governance Authority, ARGA) with stronger powers and funding. Among proposed reforms were forcing large companies to split their audit with a smaller firm and banning failing auditors from big accounts. However, as of 2025 those plans have been delayed. The UK had already introduced some measures: since 2016, UK-listed companies must tender their audits every 10 years (and rotate firm every 20) if shareholders reject reappointment, and limits on what consulting auditors can provide to audit clients. The fallout from scandals like Carillion and BHS spurred these reforms, but implementation remains a work in progress.
European Union: EU law has its own audit rules that apply across member states. Since 2014, the EU requires mandatory rotation of audit firms for public-interest entities (PIEs) every 10 years (extendable to 20 in some cases). Firms must also rotate lead audit partners every 5 years. The EU banned certain non-audit services (like most tax services) to reduce conflicts. Enforcement is decentralized: each country’s regulator (e.g., Germany’s BaFin, France’s AMF) handles inspections and penalties. The EU also created the European Public Company (SPC) regime with extra scrutiny. However, differences remain; for example, enforcement action in one country cannot easily reach an audit firm branch in another country. The European Commission regularly reviews audit quality and is pushing further reforms as part of its strategy to restore public trust in corporate reporting.
Other National Regulators: Many countries have their own audit watchdogs. For example, Australia’s corporate regulator ASIC inspects audits and has pursued high-profile cases against audit firms. Canada has the Canadian Public Accountability Board (CPAB) overseeing auditors of public companies. Japan has an audit oversight board (CPAAOB) under its Ministry of Finance. India created the National Financial Reporting Authority (NFRA) in 2018 to oversee auditors of large firms. Hong Kong and Singapore each have independent regulators that inspect both local and international audits. Some smaller markets still rely mainly on their accounting institutes (e.g. the Institute of Chartered Accountants of Country X) to enforce audit standards, which can leave gaps. In many emerging economies, regulators point to limited budgets and resources as a challenge.
International Standard Setters: On the global standards front, the International Auditing and Assurance Standards Board (IAASB) issues International Standards on Auditing (ISAs) that have been adopted in over 100 countries (for example, in the EU, Hong Kong, Australia, and parts of Africa and Latin America). Alongside, the International Ethics Standards Board for Accountants (IESBA) sets the global Code of Ethics for auditors. Both bodies operate under the International Federation of Accountants (IFAC), which represents national accountancy organizations. To help keep these international rules credible, a Public Interest Oversight Board (PIOB) — composed of stakeholders from around the world — reviews and oversees the IAASB and IESBA. However, IFAC and its boards do not themselves inspect audit work; they only set guidance. Adoption of ISAs varies: some countries modify them, others follow them to the letter, and a few (like the U.S. and Japan) have their own standards that differ in places.
International Forums: Audit regulators increasingly cooperate globally. The International Forum of Independent Audit Regulators (IFIAR) is a network of over 50 regulators (including the PCAOB, FRC, ASIC, and others) that share inspection findings and best practices. Each year IFIAR publishes survey reports showing that roughly 40–50% of inspected audit engagements in big firms have at least one “finding” or deficiency. This has spurred joint initiatives to improve audit quality worldwide. Another body, the International Organization of Securities Commissions (IOSCO), also endorses auditing standards and helps coordinate cross-border inspections when a company is audited in multiple countries.
Public Audit Institutions: Separate from corporate audit oversight, every country also has public-sector auditors. Bodies like the U.S. Government Accountability Office (GAO), the UK National Audit Office (NAO), India’s Comptroller and Auditor General, and similar Supreme Audit Institutions (SAIs) audit government budgets and programs. These offices typically answer to the legislature and must be independent of the executive branch. They follow their own standards (often modeled on INTOSAI guidelines) and report waste, fraud, or inefficiency in public spending. While not part of the corporate audit debate, SAIs illustrate the principle of auditor accountability: they often face intense political pressure and budget limits of their own. A government audit office that repeatedly flags mismanagement but cannot compel action shows that audit work, public or private, only serves the public interest if its findings have real consequences.

In sum, audit regulation is a complex web. Large economies tend to have formal agencies with enforcement powers, while smaller or developing economies often struggle to build robust oversight. Internationally, there are standards and forums for coordination, but ultimately auditors answer to national laws and regulators. Discrepancies between countries can create loopholes: for example, U.S. law requires foreign companies to allow PCAOB inspections of their auditors, but China has resisted, causing a standoff over Chinese IPOs. The question “Who audits the auditors?” has many answers — and in many places, the answer is that oversight is still catching up to the global reach of audit firms.

Auditor Independence and Conflicts of Interest

A key challenge in the auditing profession is independence. Auditors are expected to act in the public interest, but they operate in close relationship with the companies they audit. This dynamic creates conflicts that can undermine true impartiality:

Consulting vs. Auditing Services: The largest audit firms often have two major lines of business: auditing and consulting/advisory. A firm might advise a client on tax planning, IT systems, strategy, or management issues — while also auditing its books. These additional services can be lucrative, sometimes outweighing audit fees. The risk is clear: if the auditor finds serious problems in an audit, it risks angering a client that pays even more for consulting. To guard against this, regulators have imposed some limits. For example, the Sarbanes-Oxley Act prohibits U.S. auditors from providing certain non-audit services (like bookkeeping or financial software implementation) to their audit clients. The EU likewise bans many management-consulting services for audit clients. But firms still do vast amounts of allowed advisory work. Critics argue that unless audit and advisory are fully separated (even by internal “Chinese walls” or by legal split), auditors may soften their stance so as not to lose both revenue streams.
Long-term Engagements: Many companies keep the same audit firm for decades, and sometimes audit partners rotate but firms do not. Over time, an auditor can become very familiar and even friendly with management, which can dull skepticism. To counter this, some rules require rotation: for example, EU law mandates that PIEs must change firms at least every 10 years (though extensions can be granted). In the U.S., firms themselves often rotate their lead audit partner every 5 years, but the same firm can continue indefinitely. There is debate over how effective rotation is: while a fresh auditor might catch new issues, mandatory switches can disrupt continuity and increase costs.
Economic Dependence on Clients: If a few large clients make up a big chunk of an audit firm’s revenue, the firm may be reluctant to criticize them harshly. Imagine a firm that earns 20% of its income from one client: saying no to that client could mean significant financial loss for the firm and staff. Many professional reviews of audit failures note that auditors sometimes faced pressure (direct or indirect) from client executives to accept optimistic accounting. Audit committees are supposed to insulate auditors from this pressure, but if an auditor never pushes back, it may be because of these economic ties.
Market Concentration: The sheer dominance of the Big Four creates an independence issue of its own. When nearly all big companies have only four choices of auditor, the power dynamic shifts. If one of the Big Four were ever kicked out of auditing (or failed dramatically), there would be no obvious replacement. This can lead to a “too big to fail” mentality, where neither management nor regulators want to push too hard against a Big Four firm for fear of causing collateral damage to the market. In some remarks, regulators have noted that appointing a Big Four auditor is almost a given for large firms, and so the firms grow comfortable. Greater competition (via smaller firms entering top audits) is often suggested to reduce this pressure.
Regulatory Capture and “Revolving Doors”: Auditors are heavily regulated by professional bodies and government agencies. However, audit firms do significant lobbying on accounting regulations and have a strong voice in setting standards. Moreover, there is often a “revolving door” of personnel between firms and regulators. For instance, many financial regulators were once auditors, and some audit partners later join regulatory boards. While experienced auditors can contribute expertise to oversight, critics worry this closeness can make enforcement softer. If regulators feel reluctant to punish firms that they or their colleagues came from, accountability suffers. Conversely, audit firm partners might moderate their actions if they hope for cushy government jobs later.

Because of these conflicts, many experts argue that external checks are essential. Simply telling auditors to “be independent” is not enough; systems must enforce independence. That is the logic behind many reform proposals (discussed below) and why regulators focus on fees, partner rotation, and ownership structure. In the end, preserving auditor objectivity is a constant challenge: auditors must serve company owners and the public, even though companies pay their bills.

Public vs. Private Audit Institutions

So far we have focused on private-sector auditors of companies and their regulators. It is worth contrasting this with public-sector auditing, which operates in a different framework.

In every country, government activities are also audited — typically by a Supreme Audit Institution (SAI) or national audit office. For example, in the United States the Government Accountability Office (GAO) audits federal agencies; in the UK the National Audit Office (NAO) audits government departments; in India the Comptroller and Auditor General checks public accounts; Canada has an Auditor General, and so on. These bodies ensure taxpayer money is spent as the legislature intended. They are usually independent agencies (often created by the constitution or law) and report to the parliament rather than the executive branch. Internationally, SAIs share best practices through the International Organization of Supreme Audit Institutions (INTOSAI).

Public-sector auditors have an accountability structure of their own. Since they are not private firms, they do not face a profit motive in the same way. However, they often lack strong enforcement power: an SAI can issue scathing reports about corruption or waste, but it rarely can force prosecutions. Its strength lies in transparency and legislative backing. If the public and lawmakers take the SAI’s findings seriously, it keeps government leaders in check. For example, GAO reports to Congress carry weight because Congress controls budgets and oversight.

The challenges SAIs face have parallels with private audit oversight. Both can suffer political pressure, limited budgets, or an overload of work. For instance, a government office might identify billions in questionable spending but see no follow-up enforcement. Similarly, a corporate audit office might ban an auditor firm from a stock exchange but not recover investors’ losses. In short, whether auditing companies or governments, the underlying issue is the same: auditors are only effective if independent and empowered.

One point of intersection is that sometimes private audit firms also do public audits (for example, auditing a city’s financial statements). In those cases, it becomes even more important that independence rules are upheld, since now a firm is auditing a government-controlled client. In other cases, a government might audit its own companies. The key takeaway is that accountability in auditing is universal: without checks on auditors (be it in the boardroom or the legislature), financial reports of any kind cannot be fully trusted.

The Big Four Audit Firms and Market Concentration

A defining feature of today’s audit profession is the concentration of market power in the “Big Four” accounting networks: Deloitte, PricewaterhouseCoopers (PwC), Ernst & Young (EY), and KPMG. These four firms audit the vast majority of large public companies worldwide. For example, about 97% of the companies in the FTSE 350 index (UK) and the S&P 500 index (USA) are audited by one of the Big Four. In many countries, most major banks and big corporations are audited by these firms.

This concentration stems from history. In the 1980s, there were eight major international audit firms; mergers and the collapse of Arthur Andersen (post-Enron) winnowed the field to four. Many clients prefer the Big Four because they have a global reach and a trusted brand. However, the dominance has raised concerns on several fronts:

Too Few Alternatives: With only four choices, companies and regulators worry about lack of competition. If one firm delivers poor quality, clients have limited alternatives. If a Big Four firm were ever to withdraw from auditing or fail, the others would scramble to pick up clients, possibly stretching themselves too thin. This fragility itself is a systemic risk. Some have warned that the collapse of a Big Four could be as destabilizing as a bank failure, given how integrated they are in financial markets.
Reduced Pressure for Quality: In a competitive market, clients might shop for the most rigorous auditor. But when everyone ends up with one of the same four, there is less pricing or quality pressure. Big auditors know companies will come back to them anyway. It can also lead to cosy relationships: partners at the Big Four have collaborated on standards and even rotated between firms or into client management roles over their careers.
Barriers for Challengers: Mid-tier audit firms (like Grant Thornton, BDO, RSM, etc.) routinely audit smaller companies, but rarely land the largest corporations. When they do, it’s often a joint audit. Challenges for smaller firms include lacking the global network to audit multinationals and not being perceived as adequately independent or expert. Some regulators have tried to boost challengers: for example, a UK proposal was that FTSE 350 companies should use a “challenger” firm for a significant portion of their audit. However, in practice this rule has not been enforced as strictly as planned, and Big Four audits still dominate.

Given these issues, many experts and policymakers have floated radical ideas for breaking up or limiting the Big Four’s power. Proposed solutions have included:

Structural Separation: Legally split audit from consulting. For example, require Deloitte to become two separate companies, one doing audits and one doing advisory. The idea is to remove conflicts and reduce firm size.
Audit Market Caps: Set a maximum market share (say 25%) for any one audit network in the public-interest company segment. If a firm exceeded that, it would have to divest clients to smaller firms.
Joint Audits: Mandate that two or more firms audit each large company together. This is already practiced in France and Brazil. Proponents say it gives smaller firms a role and brings more scrutiny. Critics say it doubles costs and can lead to coordination problems.
Government-Owned Auditor: Some academics (like the “Audit Board” proposal) have even suggested creating a public or non-profit audit entity to handle major audits. Such an entity could be insulated from profit motives and potential conflicts. However, this is a very controversial idea and has seen little traction beyond academic debate.

So far, no simple fix has emerged. The Big Four have fiercely resisted most competition remedies. Some countries, like Germany and Italy, have created incentives for companies to rotate audits more or give work to mid-tier firms, with mixed success. Regulators admit that breaking the Big Four’s grip will take time and likely require combination approaches. Until then, audit reformers must reckon with the reality that these four firms set much of the profession’s standards by default — for better or worse.

Proposals and Models for Reform

In response to these challenges, many practical proposals have been made to increase auditor accountability and audit quality. They range from tweaking existing rules to reimagining the entire audit model. Key ideas include:

Mandatory Rotation of Auditors: Shorten audit tenure. For example, require companies to switch audit firms every 5–10 years. The EU currently mandates a 10-year rotation for large public-interest firms. Some argue this forces fresh eyes on the books. Others note it can also lead to loss of accumulated knowledge. Still, rotation of either the firm or at least the lead partner is viewed by many as a worthwhile check against complacency.
Split Audit and Consulting: Prohibit or limit non-audit services more strictly. Some proposals go beyond existing laws to completely ban an audit firm from providing any additional services to the same client, period. Others suggest creating a complete firewall within firms (or splitting them into separate entities). The idea is to ensure auditors have no financial incentive tied to other work that could influence their audit judgment.
Enhanced Audit Reporting: Make auditors more transparent. One successful change has been the move to richer audit reports. For instance, the U.S. PCAOB now requires auditors to include in their reports “Critical Audit Matters” — a discussion of the most challenging parts of the audit. Similarly, international standards (ISA 701) call for disclosing “Key Audit Matters” in some audits. Such disclosures help users see where auditors were most concerned, instead of just getting a generic “unqualified” opinion.
Greater Regulator Powers: Strengthen oversight agencies. This can take many forms: higher fines for audit failures, personal liability for audit partners, or power to force companies to change auditors. For example, the PCAOB can prohibit a firm from auditing public companies. Some suggest going further, giving regulators authority to appoint auditors in extreme cases or to intervene in audit committees. Improving regulators’ funding and expertise (so they can inspect more audits) is also on the reform wish-list.
Audit Quality Indicators and Transparency: Require firms to publish metrics on audit quality. This could include details like the number of hours spent on audits, staff training levels, or how often audit partners meet with the audit committee. If investors had access to these “report cards,” they could make better decisions and markets could reward high-quality auditors.
Limiting Firm Size or Market Share: As noted, some reforms propose strict market share caps or mandatory sharing of large audits with smaller firms. This might mean, for instance, that a U.S. or UK bank or utility must have at least two different audit firms sign off on its books, instead of just one Big Four firm doing the whole job.
Independent Public Audit Sector: A more radical idea is to create a public or quasi-public auditor. One proposal called for an independent “Audit Board” (staffed partly by auditors on loan) to perform or oversee audits of major companies. This body would not be driven by profit and could be structured to avoid conflicts. While not implemented anywhere, it represents how far some thinkers will go to align audits with the public interest rather than private practice.
Strengthening Audit Committees: Pushing more responsibility onto company audit committees to vet and challenge their auditors. Best practice recommendations suggest that audit committees should own the audit tender process, evaluate audit quality, and communicate directly with regulators if needed. Some reforms call for audit committees to disclose how they chose the auditor and how they handle disagreements.
Investor Involvement: Give shareholders a say on auditors. In some places, proposals include putting an auditor-approval vote in annual meetings (akin to say-on-pay). This theoretically forces auditors to answer directly to owners. So far this is not widely practiced, but it’s an idea in play.
Education and Culture Change: Reforms beyond rules can include improving auditor training and professional ethics. Continuing education on fraud detection, skepticism, and integrity is a softer measure but could have long-term impact. Professional bodies can emphasize a culture that values quality over billing hours.
Embracing Technology: While not a traditional “reform,” the use of data analytics, continuous auditing software, and AI tools is seen as a way to make audits more rigorous. Regulators encourage firms to innovate in their audit methods. Some foresee regulators themselves using tech to better analyze audit work.

Some of these reforms have been partially implemented. For instance, mandatory rotation and restricted consulting are already law in many places. Audit committees have gained prominence. The PCAOB and IAASB have issued new standards focusing on fraud risks and documentation. However, many ideas remain on the drawing board due to opposition, complexity, or cost concerns. Implementing change in the audit ecosystem is slow, and often happens in response to crises. Each year’s regulatory and parliamentary reports typically revisit the same list of proposed fixes, showing that momentum builds when scandals erupt but can wane over time.

In the end, there is no single silver bullet. Most experts agree that a combination of stronger oversight, cultural shifts, and market reforms is needed. The aim is to make auditors more accountable to investors and the public at large — for example, by raising the personal stakes for audit partners, or by making audit committees more vigilant guardians. Whether through tougher rules or better practices, the goal is to ensure that the next generation of audit failures becomes a rare exception, not a recurring headline.

Toward Greater Accountability

Auditors play a vital role in the global financial system, yet as history shows, they too can fail. The question “Who audits the auditors?” highlights a critical gap: while markets demand independent audits, the architects of those audits have often escaped the scrutiny needed to keep them fully honest. Around the world, regulators, legislators, and professionals are wrestling with this challenge.

Our survey has seen that after each new scandal, some reforms follow: new laws, tougher penalties, and fresh oversight bodies. There are glimmers of progress. Audit reports are becoming more informative; international regulators share information; some countries are requiring joint audits or forced tendering. But auditors have powerful allies (in corporations and politics) and deeply rooted incentives. Moreover, the globalization of business means reforms in one country are only as good as the weakest link elsewhere.

In the end, increasing auditors’ accountability requires action on many fronts. Technological innovation might aid audits, but it cannot replace human judgment and integrity. Ultimately, the solution lies in transparency and incentives. Companies should be transparent about their audit choices and about any non-audit services purchased. Audit regulators need resources and independence to shine light on poor audits, and the courage to sanction firms that endanger investors. Audit firms themselves must cultivate a culture where serving the public interest outweighs short-term profit. Even shareholders and pensioners have a role: by demanding better audit quality and by paying attention to audit-related disclosures, they can pressure companies to choose the best, not the cheapest, auditor.

As the global economy evolves, trust in financial reporting is more crucial than ever. Governments, investors, and societies depend on the integrity of audits. Ensuring that auditors are watched — and when necessary held accountable — is a shared responsibility. No system is perfect, but by combining regulatory vigilance, market incentives, and professional ethics, the goal is to make auditors truly deserving of the trust we place in them. Only then can we be confident that when auditors say “everything checks out,” they really mean it.