Junior auditors: give them a pay rise

Pity the life of the junior auditor. The job is a bit of a grind. The hours are long. The reputational hazards are great. And the pay, as the abacus-rattlers will have worked out, is falling in real terms. That is not going to help attract and retain top talent — which is unfortunate given the important public service role of auditing.

Who is responsible for audit’s dreary employment proposition? Big Four accounting firm PwC has pointed the finger at the regulator’s penchant for naming and shaming dud auditors. Jan du Plessis, chair of the Financial Reporting Council, believes standards should be tough, and that the solution is to pay the talent more.

Du Plessis is right. Top students are increasingly motivated by pay in choosing their future career, says an annual survey carried out among Oxford university undergraduates. Salaries at accounting firms are stuck in the past. Even after last year’s increases, new graduates joining a Big Four firm in London might make £32,000-£35,000 yearly, according to industry body ICAEW. Trainee investment bankers and top lawyers get twice that. 

Accountancy firms might argue that they train graduates up to their Chartered Accountancy exams, which is a big benefit. Indeed, another choke point for the industry comes when newly-qualified auditors get poached by banks and companies needing their skillset. 

Here, too, money might be part of the answer. Pay for newly qualified auditors at big firms has struggled to keep up with inflation. The average salary of £50,000 in 2016 has risen to £60,000, according to recruitment specialist Hays. In real terms, however, it has fallen to £45,000.

If there is a silver lining to all this scrimping, it is that audit firms are having to cast their nets wider in order to fill their vacancies. Employers are more often considering graduates with lower classes of degree. About 15 per cent of members of the Institute of Chartered Accountants of England and Wales have joined the profession directly from school. A broader approach to talent spotting does not necessarily entail a fall in standards. It may produce a more diverse cohort. 

Auditors have a vital role to play in checking the veracity of companies’ financial disclosures. Companies and their investors have a quality assurance role of their own: discouraging audit partners from overpaying themselves and underpaying juniors who do so much of the work.

The Lex team is interested in hearing more from readers. Please tell us whether you agree with our argument or not in the comments section below