A NOTE FROM KPMG'S AUDIT COMMITTEE INSTITUTE
It's telling that so many private companies around the world have their financial statements audited – even when they're not always required to do so. An audit provides lenders, investors, and the capital markets with critical added assurance on the integrity of the company's financial statements and related controls. As we've heard more than one observer say, "if the financial statement audit didn't exist today, someone would invent it." That said, audits – and auditing – are, in some ways, on the cusp of dramatic change, if not reinvention.
In this edition of Global Boardroom Insights, we explore the current state of the audit – where audit quality stands today, drivers and indicators of audit quality, and various stakeholders' expectations of auditors – and what the near-and-long term may hold for auditing. Is audit quality continually improving? What are the key drivers and indicators? Should the auditor's report be expanded beyond the "pass/fail" audit opinion? What innovations can companies expect to see in auditing in the next 3-5 years?
We posed these and other questions to seasoned audit committee chairs and audit professionals; and while their answers differ in nuance and emphasis, several themes are clear. Audit quality remains strong today, but the push for greater transparency and insight into the auditor's work, and the advent of data analytics capabilities to help auditors scrutinize a much wider pool of transactions, continue to raise the bar for the audit profession. Indeed, the ever-present "expectations gap" – understanding what the audit does, and does not do – will continue to be a challenge for auditors; but expectations are nevertheless rising as regulators around the world move toward expanded auditors' reports, and call for more insight and perspective from auditors (and audit committees).
Not surprisingly, the audit committee's engagement with auditors – as well as internal audit and the finance organization – continues to deepen; and as one audit committee chair notes, discussions are increasingly risk-oriented. "Today we have a better handle on what the company's critical areas of risk are, and where the auditor needs to be particularly focused." This bodes well for the company, its investors, and the marketplace – and it hints at the evolution of the audit.
We hope you find this edition of Global Boardroom Insights helpful in sparking robust discussions on audit quality, the role of the auditor, and the future of audit.
Dennis T. Whalen (U.S.)
Wim Vandecruys (Belgium)
Robert Araeb (Nigeria)
Sidney T.T. Ito (Brazil)
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