Just when auditors and accountants thought rules and regulations governing the profession couldn't get any stricter, the financial crisis hit. As some of the world's biggest banks folded, the profession again found itself in the firing line - this time over fair value accounting.

SA Institute of Chartered Accountants accounting projects director Sue Ludolph says banks have used accounting as a scapegoat. "Accounting happens after the event, it's not the cause."

Fair value accounting requires firms to account for financial instruments at the value they could get for them on the open market at the time of reporting. Critics of fair-value accounting argue that the crisis was triggered because banks were forced to account for "toxic assets", such as mortgage-backed securities, at fair value.

Because they were not able to find buyers on the open market for the assets, they struggled to price them correctly and were forced to make huge write-downs. "There is a realisation that there is a limit to what you can expect from the audit process," says Grant Thornton national chairman Leonard Brehm. "Though it provides information about the past, there's an opportunity to provide more forward-looking information such as more detailed commentary about the risks businesses face."

Facing increasing political pressure to urgently review and revise accounting standards, the profession set up the Financial Crisis Advisory Group. Established by the International Accounting Standards Board and the US Financial Accounting Standards Board in November, it will advise the profession on what role accounting played during the crisis and how best to deal with similar crises in future.

As companies seek to cut costs, clients are putting pressure on firms to keep audit costs down. One of the trickiest assessments auditors must make is on the going concern status of companies. Though auditors are prohibited from making forward looking assessments, such as taking a view on interest or exchange rates, they must give an opinion on whether the company will still be in operation one year down the track.

PricewaterhouseCoopers CEO-elect Suresh Kana says the profession must also face the threat of being sued by shareholders when companies fail.

Ernst & Young head of assurance Ajen Sita says though the financial crisis is likely to affect economic growth, and by extension, the business of auditors, growth is likely to come from increased demand from state-owned enterprises and government departments. "More than ever, government and state-owned enterprises will need independent audits in order to attract capital to fund large-scale projects."

Brehm says there is also significant opportunity for midsized firms in this economic environment. "Companies are re-examining their service providers in light of the recession. They now accept that there are alternatives."

Locally, the JSE has attempted to improve the quality of financial statements by implementing new registration requirements for the auditors of listed firms. The requirements translate into extra costs for auditors, hitting midtier firms the hardest.

Amendments to the Companies Act will also affect small and midsized firms as the act states that only public and state-owned firms will require an audit. Much of the client base of smaller firms is made up of privately owned firms and nongovernmental organisations. But with these companies now being able to choose between an annual audit and an "independent review", smaller firms may have to look for new ways to bring in money.

Sita says the changes to the Companies Act will create opportunities for smaller accounting firms as companies will continue to outsource their tax and bookkeeping functions. "It's about repositioning businesses as meaningful outsourcing accounting organisations," he says.