How can your audit deliver for you?
As the regulation of audit firms increases, audits are costing more and taking longer for both auditors and management teams to deliver. Whilst we await the implementation of the Auditing, Reporting and Governance Authority (ARGA) over the course of the next parliament – which may extend the time and cost of audits. As a result, finance teams should be considering how the audit can be used as a tool that provides value for money to the business.
Audit firms have made significant investments in recent years to enable them to deliver high-quality audits, which is perhaps unsurprisingly the primary focus of the audit team. However, how audits are delivered has changed recently with an increasing focus on technology, data and analytics tools being used to enable the auditor to opine on the financial information they receive.
This has put the auditor in a unique position. An auditor now receives a myriad of information from across the business they are auditing, likely in much greater detail and scope than any individuals or teams have access to internally. This gives the auditor significant insights into the businesses they are auditing, which also enables management teams to move the audit away from a compliance exercise towards one that generates real value for a company.
How to take advantage of an audit
To fully unlock this potential, both management and the auditor need to proactively engage on a constant basis. This allows joint identification of the key risks facing the business to be addressed through the audit, including both financial reporting and commercial topics. This forms a base for both the auditor and management to use to allow all interactions to be very focused on delivering value to the audit process. This value can be derived in several ways for a business, from time-saving within the finance team, ensuring reporting deadlines are met with plenty of time to spare, and structuring transactions so that they get to both the right commercial and financial reporting outcome.
From the auditor’s perspective, this enables enhanced audit quality by focusing on the higher risk judgmental audit areas and providing strong challenge to management on these, as well as feeding back to those charged with governance. It also gives the opportunity for a continuous risk assessment which can identify any potential future risks early and allow steps to be taken to address these before they could become a problem for a business.
The auditor can use the tools available to them to provide data-driven analysis which, when shared with management teams, can help drive operational improvements and synergies across the business. For example, sharing information on how many transactions go outside a core process cycle or how many transactions have to be approved by certain users can be used by management to help reduce the risk within a business and make processes more efficient.
In the medium term for the business, the auditor can utilise their experience to provide feedback in areas where a business’s back office sits compared to its current size and growth ambitions. This feedback can assist a business in assessing its risks to avoid future problems, as well as support to inform investment decisions.
From the auditor’s perspective, this continuous feedback loop ensures that a high-quality, robust audit is delivered which really focuses on the key risks but it also allows the audits of current and future years to be delivered as efficiently as possible, reducing the pressure to increase costs further and saving time for all parties.
As the pressure on audit firms continues to increase, resulting in higher costs for business, having a continuous, transparent and open dialogue with the right audit partner can enable a business to obtain much more value out of the audit and turn the process into an investment as opposed to a compliance exercise. This, in short, a win-win for both auditors and audited.
