As the aftermath of this rapacious age, where trust is at the rock bottom, investors are seeking for increased transparency and disclosure. In this context, quality audit derives a higher value, which is beyond just meeting legal and regulatory requirements. While financial statements remain as a linchpin of the prevailing reporting model, most of the information sources that investors are looking to discern an organization’s strategy, business risks and model, furthermore it’s medium as well as longer term prospects, are not captured in the present-day statements. The question here is – should it be? And in case, if more of this investor relevant information is encapsulated in the company’s annual report, the next question that arises is – should an auditor’s eye on this information be valuable to investors? In the frame of reference of audit upheaval, we will discuss here, how audits must evolve in a better way to serve investors.
Unveiling the Value of Audit
As we apparently head out to a period of global growth, auditors and audit firms are found to face a turbulent series of challenges and revises. With fingers pointed across the audit professionals for almost every issue – from the substandard anti competitive behavior – to excessively comfortable relationships with clients and regulators, it has become highly important for us to know the value of audit, and perceive how auditors form their opinions. In the auditing process, the auditor will scrutinize and verify the financial information provided by the organization, which may not necessarily depict a true and fair view of the company’s state of affairs. However, since scope of such an external audit does not cover each and every transactions of the company, the auditors use all the available information sources and subject it to a lot of inspection, analysis and judgment. They perform audit procedures and gather audit evidences to provide reasonable assurance whether such financial statements in question depicts a true and fair view altogether.
Yes, audits are obviously worthwhile – they are simply worth the paper they are printed on! But as we are in the period of global growth, it seems to be a sensible time to find how the limitations of audits can be vanquished, and how these processes and outcomes could be improved.
Enhancing Audit Quality
Improving the quality of audits has been, and continues to be the initial mission of all organizations. In order to accomplish this, it’s of paramount importance that audit regulatory bodies should engage more broadly with the whole investor community in order to explore what they actually expect from corporate reporting and assurance – whether inside or outside of the financial statements. Changes in the audit field are already in progress; however, along with any regulation, a better relationship is required between the audit committees, auditors, investors, and management, to ensure that audits dispense the most value. Apart from the discussions carried out between the audit committees, auditors, and management, there should involve more direct communications between investors and external auditors, because, this could allow to some extent, for better transparency on the audit process and corroborate that the key stakeholders and the audit reports readers comprehend the information that is been presented and ensure the corporate report meets their needs.
As we know, expanding new technological advancements are already impacting the way businesses are done. And of course, audit is of no exception from this! Hence, an additional area that demands consideration is innovation – new tools and technological advancements make data review and analysis more efficient and effective, assist auditors to identify risk areas and map potential exposure better, to rise with new insights and ultimately improve the audit quality.
The Future of Audits
The future of audits can be bright, if audit regulatory bodies take into account, the wider interest of investors and if auditors can successfully deploy innovation and communication into audit procedures. And, when it comes to evolving the audit, it is a fact that changes are essentially as valuable only in as much as they help, investors to make better and informed decisions, and organizations to adopt a more resilient business strategy.
