- The demands made on the audit sector are growing, but it is critical the quality of audit reports is maintained and improved.
- There is an expectation gap among the public about what audits can reveal, and the audit profession should explain that.
- The people who use audits, such as shareholders and investors, must have trust that the auditor is free from conflicts of interest.
The continuing debate over the future of audit is taking place against a backdrop of significant change, with ongoing advances in automation and evolving expectations from regulators in Australia and New Zealand.
The demands made on the audit profession are growing into new areas, including cyber risk, climate change and even organisational culture. But at the same time, new technology and the use of multidisciplinary teams are opening opportunities to address these demands.
Having recently met with Sir Donald Brydon to discuss how we can contribute to his review of the UK audit market, I concluded that the heart of this debate lies in the importance of audit quality and how we can build a bridge over the expectation gap.
Maintaining public trust in audit quality
In my role as executive director of Audit New Zealand, I have seen first hand how audit practices are continuing to invest time and effort to improve the quality of audits. Yet the challenge of demonstrating the value of that additional investment to audit recipients is also increasing at pace.
Ethics differentiates our profession. It is our identity and value, and it is what underpins the trust in our profession to undertake the important role of audit and assurance. As expectations and what we deliver evolve, we have to relentlessly guard and maintain our ethics.
In the debate on audit quality, we must work to listen and learn from the entire range of perspectives. For shareholders and members of the public, audit quality is grounded in their trust of the auditor, and trust that the auditor is free from conflicts of interest. They must trust in the transparency of our judgements and, ultimately, a process that delivers as its outcome high quality reporting that is trustworthy.
Trust, however, depends as much on perception as reality. We need to work even harder in how we manage perceived threats to our independence – not just to recognise it, but also to mitigate it. We must also be prepared to have our judgements scrutinised, to be open to different views and, where necessary, to have the courage to stand our ground.
“We need to work even harder in how we manage perceived threats to our independence – not just to recognise it, but also to mitigate it.”
Audits are there to benefit users
At times, I believe the audit profession and regulators alike have lost sight of what audit quality means from the perspective of the recipient, as audit continually evolves to meet modern expectations.
It is important that the audit profession, regulators, recipients and the stakeholders of audits all work together to ensure the future sustainability of the audit profession.
We need to stop, collaborate and reset so that the audit profession can rise, and not fall, in the face of ever-increasing demands and regulation. We have to work closely, sometimes robustly, but always focus on where our objectives align – the public interest.
The value of independent audit and wider assurance has never been greater, and audit continues to offer a range of work opportunities. It’s up to us to continue playing a strong role in evolving the value provided by the audit profession into the future.