The World Congress of Accountants was a chance for leading experts to respond to thought-provoking and stimulating questions from tax regulations to tech disruption and provide some much-needed clarity on their future impact.
A significant area that was explored over the course of the four days was what exactly the term ‘audit’ means in today’s modern business environment and how auditors can continue to meet stakeholder expectations.
Stakeholder expectations on audit are based on the fact that a range of detailed audit procedures be applied by skilled individuals and the auditor be independent of financial statement preparers.
Little of an auditor’s work is directly visible to investors. It is the audit committee, as shareholder representatives and independent directors, who see and assess the behaviour and professional scepticism of the auditors. A recent Financial Reporting Council survey found that Audit Committee Chairs have been very satisfied with the quality of their external auditor with 92 per cent rating them excellent or above average.
Australia in particular has a strong foundation of stakeholder confidence in our businesses, based on open accountability, transparency and fair presentation of business results. These in turn rely on the judgement of management and directors on how they apply accounting standards.
The role of an auditor is to judge whether appropriate accounting standards have been applied by management and directors, and whether the view presented as a whole is consistent with auditor’s knowledge of the business.
This role is one in a series of measures that contribute to stakeholder confidence, including:
- a work culture that instills the importance of independent thought and professional skepticism with partners and staff;
- skilled and competent people;
- effective audit processes and methodologies;
- support from management and audit committees and others in the reporting framework; and
- commitment and structures to support partners and staff undertaking robust work.
A key measure that is often forgotten from this list is courage.
Courage from the board to speak honestly to their investors, courage from investors to make informed decisions based on the information available to them, courage from government, regulators and standard setters to keep the focus on maintaining a strong capital market; and courage of auditors to have candid and open communication with management and audit committees.
The global profession needs to continue the discussion on the purpose of audit so we can continually evolve to meet modern stakeholder expectations.