Clean up the gap between Client and Auditor
The Audit Expectation Gap is often defined as the misunderstanding between the client and the auditor, but it’s actually about value. Commonly auditors are engaged to provide an independent opinion on a set of financial statements, however many clients have expectations well beyond the standard audit report that is issued. The question becomes – what value does the audit deliver and is your auditor doing more than providing an expensive compliance service?
Many corporate auditors struggle to explain the nature of the service we provide, so it’s no wonder our clients often can’t see value. One of the problems is that our own regulators are only concerned about compliance and do not appreciate the practical value of an audit. Another expectation disconnect can be due to auditors spending most of their time working with management and employees of clients, not the shareholders they are engaged by and report to. Management may report to a Board or Committee who then report to the shareholders and the delivery can be lost in translation. As auditors we must develop a good relationship with management, however importantly we must remain independent and sceptical. When carrying out an audit we do not expect to find errors, omissions or instances of fraud. Our procedures are designed to assess whether the systems in place minimise the risk of errors occurring. The value we can and should deliver is identifying these risks and providing advice on how to address or strengthen controls.
Our experience working with many clients across various industries gives us valuable knowledge about business performance, regulation requirements, process systems and controls, risk factors, corporate governance, technology, financial and management reporting, people management and an in-depth understanding of accounting and finance. These skills and knowledge are available to clients and can add enormous value in an audit engagement. When discussing the scope of an audit ensure your auditor is aware of any risks or concerns you may have. Identify areas that you would like to see some focus, and work with your auditor to provide the necessary information to assess and report any findings.
Some questions to consider when assessing your audit service
- Why is an audit required?
- Are there any exemptions available to reduce the scope or cost of an audit?
- What is the difference between an audit and a review?
- Has the audit service been explained?
- What are the expectations of client and auditor?
- Who do the auditor’s report to, and is that understood by the various parties involved in the process?
- Are your auditors independent?
- What reporting framework are you bound to, and what are the requirements?
- Is your auditor providing advice or simply compliance services?
- Does your auditor use modern technology to streamline the audit process?
- Can your auditor provide any industry information or benchmarking data?
- Is data analytics used in the audit process?
Audit assurance does add value but the engagement must be understood by clients and the auditor. An audit should be about aligning expectations and working together to deliver that value without compromising independence.
If you are looking for the right Auditor, please contact our Audit Specialists, complete your details below and we’ll be in touch or give us a call on 03 9835 8200.