Preparing a company for an audit has been said to be about as much fun as root canal surgery or a coast-to-coast red eye flight. However, while the relationship between the company’s board, its finance director, its auditors and its audit committee has never been a particularly harmonious one, it is more pivotal than ever as everything from what companies pay for audit services, to what all stakeholders get back is under unprecedented scrutiny.
In the past year, we have seen significant scrutiny of auditors undertaking non-audit services for auditing clients – consultation on this is currently being run by the Audit Practices Board (APB) – while influential bodies such as the Association of Chartered Certified Accountants say they do not believe a separation of audit and non-audit services is either possible or desirable.
Weighing in for business, The Hundred Group of Finance Directors, in its response to the APB’s consultation, simply called for greater transparency – but no rules stopping their auditors undertaking non-audit work for them.
The audit committee, meanwhile, is in an evermore powerful position, not just in terms of assigning non-audit work to an auditor but in its ability to recommend and choose the auditor from the beauty parade that usually ensues when the incumbent’s term is coming to a close. As smaller audit firms gain ground and fight on price, the Big Four have to prove their worth more than ever before.
Perhaps it is these pressures on the sell side that explain the headline result from a survey on how happy FDs are with the service they get from their auditors, which Financial Director ran in association with KPMG. Of the 200-odd FDs who responded (from our readership and picked at random by us, not by KPMG) most tell us their relationships with auditors and their audit committee have improved in the past year.
The fundamental reason behind it, the survey says, was increased communication between the FD, the auditor and the audit committee and a heightened sense of working to a common goal. As a result, there has also been an improvement in the understanding of business, compliance and risk issues by audit committee members. The 84.5 percent who said their relationship with their auditor had either improved or significantly improved in the last year indicates how well these relationships have been managed on the whole.
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