October 29, 2015 – When people think about value, they usually gravitate toward a product that has a reasonable cost but also delivers great quality. They know there may be multiple products that can accomplish the same general objective, but that not all are the same. The same criteria hold true with a financial audit of your business – not every firm will give you the same value and quality as the next one.
But how do you know if you are getting the best value from your auditor as possible? There are no standard benchmarks, guidelines, or criteria that define a high-quality audit. Because an audit’s components are multifarious and not easily measurable, it is difficult for a client, and especially their stakeholders, to judge the quality of the audit.
The definition of a “high-quality audit” has evolved immensely over the last few years. The focus should not be solely on the opinion reached, but HOW that opinion was ultimately reached. The overall process of the audit is where most value can either be added or lost. In other words, a high-quality audit should not only deliver an objective opinion and assessment of your business’s financial status, but also take into account evolving industry environments, business and fraud risks, information technology, regulations and, reporting standards.
So why should a company invest in a high-quality audit? The key purpose of an audit is to enhance the degree of confidence that intended users, including investors, creditors, and shareholders, can place in the financial statements. For a company in a good financial position, audited financial statements can assist in qualifying for a loan, attracting new shareholders, and engaging potential business relationships. But a high-quality audit delivered by a well-respected and competent accounting firm can add much more value to your business than just a clean opinion…
1. Holistic Approach
Your auditor should not just show up once a year to complete the audit. A good auditor uses a holistic approach, involving their clients in the planning process, before and throughout the audit, and even after leaving the field. The audit should not only meet standards and objectives, but also provide a value-added perspective on your business’s financial status and processes. Does your audit or understand your expectations and consider any specific concerns from the last audit during the planning process? Do they help you to identify improvements in order to establish solutions and enhance overall efficiencies? Do they keep you up to date on the latest financial reporting standards related to your industry? Do they recognize a need for other value-added services your business could benefit from, such as tax services, information technology services, or other risk-based or process improvement projects? Remember, it is not just about the opinion, but the process and thought that lead to reaching it.
2. Managing the Complexity
The complexities of managing in today’s ever-changing environment continue their dramatic rise. This has never been more the case in the area of financial management. The business risks associated with cybersecurity, fraud and management of information technology have escalated to unprecedented levels. It is appropriate that business owners expect their auditors delever valuable advice on the best practices being implemented to effectively manage such risks. A good auditor will be sure to utilize a well-reasoned, risk-based approach to building their audit strategy so that your company can be the beneficiary of real value in an increasingly risky environment.
3. Knowing the Industry
One of the most valuable qualities a well-established accounting firm can have is the depth of their clientele. If they have experience working with other companies in your industry and have developed an expertise, they will most likely have encountered problems, situations, or improvements in other businesses that can be benchmarked against yours. A firm that knows the ins-and-outs of your industry will be more proactive in working with you to create efficiency, solve issues, and answer your questions.
4. Identifying and Mitigating Business Risks, Including Fraud
By having a significant amount of experience with the industry that your business operates in, your auditor should be able to identify specific risks that can affect your operations. For example, small business often struggle with segregation of duties, monitoring key processes and controls, and information technology security. Your auditor can provide valuable insight on how you can mitigate business-specific risks by changing components of your processes in order to avoid errors or fraud.
A common mistake made by many companies is to assume that an audit is a commodity – as in, low price wins. There are few other situations where the old adage, “You get what you pay for” applies as well as it does to the acquisition of outside auditor services. Astute followers of developments in the area of financial governance recognize the increasing volume of responsibility being placed on today’s audit committees. There is a reason for this; namely, that the challenges of managing in an increasingly complex world demand that business owners are getting the best insights and advice they possibly can. Recognizing that your outside auditor should be expected to deliver this kind of real value is a very healthy start to dealing with this complexity.
If you have a nagging feeling about your audit experience and would consider it helpful to have a discussion about the Dopkins approach, please contact your Dopkins advisor or contact Jay McWatters at email@example.com.
About the Author
Dopkins Assurance Services Group
Dopkins offers a full range of assurance services that can help improve your financial accuracy. From financial report preparation and audits of historical financial statements to preparation of an array of special attestation reports—we can help translate numbers into accurate management information so you can make knowledgeable decisions. For more information, contact Bart McGloin, CPA, CFE, CFF at firstname.lastname@example.org.