When I started my career as a trainee chartered accountant in London with KPMG over 30 years ago, this was a question I couldn’t have answered. Now with the passage of time and experience as a chartered accountant and registered auditor in practice of a variety of organisations both commercial and not-for-profit, I see more clearly what’s involved.
Conducting an audit means reporting to shareholders or other stakeholders on whether a business or other organisation’s accounts show “a true and fair view” of its financial activity.
So auditors provide an important service that enables the business world to function, can help to identify and prevent fraud and injustice, and helps the economy to remain stable.
Auditors also provide a wider set of audit-related services where they use their specialised industry and financial knowledge, and analytical techniques to get an in-depth understanding of organisations and how they function. They then use this understanding to give them advice to help them thrive in their particular marketplace, now and in the future.
Independent and unbiased auditors can confirm that an organisation’s claims about its financial position, and the process behind these claims, are true and fair. It is useful for a wide range of reasons, depending on your point of view.
Investors and shareholders
These people own the organisation but, in many cases, will not be closely involved in its day to day running. So, again, an independent audit is very interesting to them, since it provides a trusted second opinion on the organisation’s financial statements and, in turn, gives some, insight as to how well it is being run.
Company accountants/Finance Directors
These people are essentially in charge of the finances of the organisation being audited and, for them, going through an audit is mostly about confidence and peace of mind. Having an independent expert poring over your figures might be a little bit uncomfortable at times, but the reward is in making sure that your numbers are true and fair.
What’s more, most audits these days will look at “internal control systems” as well as the finances. These systems are usually established through the specific design of computer systems and, for instance, ensure that the authorisation of transactions is controlled according to clear rules and policies. Knowing these control systems are sufficiently strong and are working properly is also very reassuring.
Finally, many company accountants and finance directors also value working closely with auditors, believing they can help to solve complex accounting problems, offer world class advice on issues ranging from governance to business processes and keep them up to date with the latest techniques, rules and regulations.
Peter Howard-Jones is director of corporate finance and audit at websters and is regulated by the ICAEW to undertake audit work. Case studies and testimonials of his work may be found on peterhoward-jones.com