The choice of an external auditor is yours to make, and there is much to consider in this very important decision. Your choice will probably mean a relationship with the same external auditors over a number of years and their insights are likely to be critical to your organisation’s success.
An external audit should deliver much more than business compliance. It should be conducted by a company with RCA, CA and/or CPA qualified team members that are able to find and communicate cost effective recommendations. In regard to your business processes and risks, they will need to be able to provide assurance and comfort, as well as identify openings for improvements. And with their specialist knowledge and experience they will be able to guide you through financial reporting and accounting processes.
There are many factors you should look for in choosing an external auditor.
Entities who need an external audit to meet requirements for external regulators include:
- Small Proprietary Companies that are foreign-controlled
- Public Companies and Registered Schemes
- Large Proprietary Companies and Companies limited by guarantee
- Self-managed Super Funds (SMSF)
- Australian Financial Services (AFS) Licensees
- Larger Charities, Co-operatives and Associations
- Holders of authority to conduct a fundraising appeal
[Note: A few exemptions can apply.]
To add value for your business, auditors must bring the right combination of qualifications, experience, technologies and approach to the task. Following are some of what needs to be considered in making your choices.
How to choose the right auditor: the criteria to consider
1. Industry experience
If your auditor has experience within your industry, this will typically translate into a more efficient audit and avoid generic questions being asked. It will also enable them to provide relevant value-added services and translate their analysis into concrete actions that your business can undertake. Continuity of audit staff working on your organisation’s audit will also enable a more efficient audit year after year .
2. Qualifications
When an audit is conducted for the purpose of meeting an external regulator’s requirements, it is essential that the lead audit partner meets the conditions that the regulator requires. For example, if your audit is to comply with ASIC requirements, only a registered company auditor (RCA) can conduct your audit. To ensure your auditor is registered, you can check their details in the professional registers section of the ASIC website.
3. Use of technology
If your auditor isn’t using technology and data analytics to perform your audit, you’re missing out on important insights. Technology can access entire data sets across large organisations, thus quickly uncovering anomalies and freeing auditors to assess their findings, interpret the data, and focus on business implications. This means you’ll receive more proactive advice and future-focused action items to assist in improving your business operations.
4. Quality assurance processes
Any auditor you choose should be able to demonstrate how they ensure compliance with relevant legislative requirements, auditing standards, and reporting best practices. For example, do they have regular peer review procedures in place? Do the audit partners and do their staff attend regular technical training and professional development, both in-house and externally?
5. Reasonable fees
The fee you pay must be adequate. ASIC has emphasised that it is important for business directors to ensure the audit fees are appropriate and do not have the potential to adversely affect the quality of the audit. At Accru we have seen situations where financial reports are held out to be audited but the auditor was either not a registered auditor or the ‘audit report’ was not the correct report to meet regulatory requirements. Remember, you do get what you pay for!
6. Reputation of the audit firm
Testimonials, references or awards are a good indication of an audit firm’s reputation in the industry. For example, the Australian Financial Review Client Choice Awards are voted on by executive level clients of audit firms, such as directors and senior management, and reflect your peers’ opinions of the services received. In this regard, Accru is honoured to have received the Australian Financial Review Client Choice Award for four consecutive years.
7. Ongoing support for decision-making and growth
A good auditor is also a business advisor in regular contact with you throughout the year to bring to your attention matters that are relevant to your business. Agile decision-making often demands real time data. This is where your auditor can help. Additionally, audit firms who are part of a global professional network can add value further down the track when you decide to expand your business internationally.
While external audits are a regulatory necessity for some entities (see below), a good external audit delivers more than business compliance, more than just reporting results of past financial measures. For example, your auditor should be a business partner who is able to provide deep analysis, assurance and future-focused business advice. After all, there is a reason that a windshield is so much larger than a rear-view mirror!
Accru auditors consistently strive to excel in all the above areas and deliver audit outcomes which exceed clients’ expectations. Please contact us if you would like to know more about how an audit could benefit your business.
"