There is a real human cost when audit fails. Corporate collapse can cause project shutdowns, redundancies, major losses for suppliers and company pensioners; and in the case of bailouts and public contractors, it can incur significant costs to the public purse. The decisions made based on financial audits affect us all, through our pensions or savings, or as customers or suppliers of companies. Failure in audit also undermines public trust both in the companies being audited (and often delivering public services) and in the state institutions that should be regulating them. For more context on the need for audit reform, please see our 'Call for Action on Audit Reform' blog post.  

We believe there is a clear window of opportunity for reform, and that is why Luminate is launching its Open Call for proposals tackling audit failure. Below we provide more information about the funding, areas of interest, and how to apply.

Luminate has dedicated USD 250,000 in 2020 to fund work that addresses the need for audit reform and explore whether further investment would be constructive. This follows research presented in the Auditing with Accountability report produced by the University of Sheffield and Copenhagen Business School in March 2020. The report outlines an accountability gap that requires:

• stronger incentives for auditors to query and challenge dubious financial practices;
• more teeth for regulators to punish poor performance and illegal activity;
• a revised understanding of what the role of audit should be.

Luminate will support a small number of projects (likely between three and five) to address audit failure. The topical guidance below provides the parameters within which we are now seeking proposals.

We will consider a mixture of short-term and longer-term solutions in major audit markets around the world. Applications should respond to one (or more) of these areas of work.

• Policy work to inform the UK Government’s current reform agenda in the next 12 months, especially the forthcoming consultation on reform of the Financial Reporting Council and the Council’s Transformation Programme. This could include (but is not limited to) the following types of activity:
  • advocacy for specific policy and/or legislative solutions and associated political engagement strategies
  • coalition building to support reform proposals
  • policy development around reform proposals in the UK, including the work of the Business Select Committee into Delivery Audit Reform
• Globally building a stronger narrative around the public interest and business cases for audit reform, including but not limited to:
  • increasing fluency in audit reform for stakeholders via accessible materials that build on Auditing with Accountability report’s findings and recommendations;
  • making the case for robust auditing in a more inclusive and sustainable economy;
  • exploring investors’ needs in terms of audit quality and management accountability.
• Addressing broader dimensions to audit reform that may require multi-jurisdictional action, especially:
  • the appropriate role of fair value (mark-to-market) accounting;
  • structural and legal separation of audit from consulting in professional services firms;
  • supporting behaviour change within the audit industry, especially the ability for auditors to challenge dubious financial practices and to reconnect auditors with their original public purpose.

Expressions of Interest will be accepted until 11.59pm GMT, 31st July. Application forms can be downloaded here, or by following this link using the password AuditReformApplication. Please send your application and any enquiries to: [email protected]. Initial submissions will be considered by Luminate staff and short-listed for further consideration by an advisory panel consisting of:

• Alex Jacobs, Joffe Charitable Trust
• Margot Gibbs, Finance Uncovered

Selected proposals will then be invited to provide additional information. Final funding decisions will be made by Luminate’s staff according to our usual funding process. There is no guarantee of funding until Luminate concludes its due diligence process and both sides sign a funding  agreement.

Timeline after initial application

• After submitting your Expression of Interest, you will receive an email from Luminate confirming that we have received your application. 
• Clarifying material may be sought during August.
• A determination notice will be provided to all applicants by the 28th August, which will explain if they will be taken through to our formal funding approval process. 
• We aim to conclude all funding and disbursements by 25th September.

Timeline is subject to change at the sole discretion of Luminate.

•  Auditing with Accountability report, funded by Luminate
• Scoping paper on Civil Society’s Role in Audit Reform, commissioned by the Joffe Charitable Trust
• Independent review of the UK’s Financial Reporting Council (Kingman Review)
• Independent review of the quality and effectiveness of audit (Brydon Review)
• Luminate blogpost on Reforming Audit in the Public Interest