Why did the last financial crisis occur and why on earth did auditors fail to warn us against it well in advance? Questions like this usually derive from a low awareness of where the core of an auditor’s work lies, which results in inadequate and excessive expectations. On the other hand, however, the crisis should have led, and to some extent did lead, to the identification of areas for improvement in the audit process, establishing a plan on how to develop this profession in the future.
De facto, an audit only confirms historic financial information stated in the financial statements. For decision-making purposes, however, shareholders and other parties concerned increasingly need information stated outside the statutory accounts since the financial statements often do not provide sufficiently deep and current insight into an organisation’s operations.
What can we do about this? First, we should focus on where an organisation’s values are really created and not spend an excessive amount of time on dealing with regulatory requirements, as these may actually reduce the willingness of auditors to examine an organisation’s operations with an inquisitive eye. This primarily applies to auditors who are new to the profession.
Second, we must make better use of our position as persons who may get under an organisation’s skin much more easily than others. In addition to standard audit reports, auditors should thus provide their clients with their views of the organisation, analysing and interpreting its various functions such as IT, HR, legal, finance, controlling and risk management. Auditors could thus provide their clients with broader assurance regarding information outside the financial statements, for example, non-financial information such as the fluctuation of employees, waste management, etc. since such information may bring added value to its users.
Auditors have a unique chance to do just that. It is up to them and the regulators how well they will utilise this chance.
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