We might have all heard at some point that all that matters in an audit is the audit opinion. That is all you are paying for, they say. But is this perception accurate? In more ways than one, this perception is not only completely inaccurate but dangerous. Audits are generally costly, not only financially but also require significant management time and board attention. Because organisations invest a significant amount time and money on audits, it may be worthwhile to know how they can get the most value out of them.
While some organisations may be getting this right, it may not be as obvious as one may think. So let us explore a few success factors for getting value for money in your audit.
You are on the same side! Let me dispel the notion that an audit is only designed to identify weaknesses in controls and that auditors serve as hound dogs to management. While weaknesses in controls may be identified, and recommendations made, that is not solely why an audit is performed. If anything, the auditor is there to help management, the board and the shareholders achieve their ultimate objectives. The traditional tension and discomfort normally associated with the audit process has long prevented organisations from getting value adding audit services.
An audit is a continuous process. The interaction between the auditor and management, the board or audit committee should not only start and end when the audit team is at the client premises. They say such a relationship is akin to a post mortem without the benefit of death. The need for the auditor’s involvement in the key accounting events during the year cannot be overemphasised. Of course, this should be done within the bounds of auditor independence.
Alignment to strategy. Any investments that does not contribute towards attaining goals and objectives is wasteful. Why then would a company invest in an audit which does not help directly or indirectly towards the organisation’s strategy? An audit should not just be generic, but rather tailored in response to the risks an organisation faces.
A good relationship matters! You can certainly expect to realise a whole lot more benefits from having a good relationship with your audit firm. Benefits of good auditor-client relations include, and are not limited to trust, independence, timeliness, value and communication.
Most importantly, management’s involvement is key. An auditor is in no way responsible for fixing a client’s problems, or making any decisions on behalf of management. To enhance independence and accountability, management should be responsible for all the financial information and results. Management should own all findings and recommendations in an audit, as much as they should own any successes thereof. For this to work, management and the auditor should be clear about the expectations of each party right from the start.
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The information contained in this newsletter is of a general nature and should not be used or relied upon as a substitute for detailed advice or as a basis for formulating business decisions. Please contact the writer for advice relating to your specific circumstances. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.