Are your auditors asking the right questions? How to audit your auditors
July 25, 2018
The primary purpose of an audit is to form an opinion as to whether the financial statements of a company or organisation (as prepared by management) accurately reflects the financial state of the organisation.
In the process, the auditor may uncover evidence of fraud, examples of sloppy management, or a lack of relevant processes.
While the specific questions you can expect your auditor to ask may depend on the type and size of your organisation, there are some common questions you should expect them to ask.
And to get the most out of your auditor’s experience and expertise, there are some questions you should also be asking them.
What your auditor should ask
- What is the evidence to support that? Your auditor will want to see documentary evidence of selected transactions to ensure their validity
- Can you explain that to me? This signifies that your auditor is not afraid to ask ‘silly’ questions, and is truly seeking to understand the issue under examination
- Who else performs this function? In other words, is there someone else in a position to spot any irregularities? Also, consider who else reviews and performs this function when you’re on leave
- Are there any management incentive plans? Incentive plans may encourage manipulation of the profit calculation to boost bonuses
- What’s it like to work here? Workplace culture has a big influence on what is collectively considered to be acceptable behaviour. Bullying and harassment represent very real legal, financial and reputational risks that all organisations need to address.
What you should ask your auditor
- In organisations like ours, which activities are most open to fraud? Experienced auditors will be able to point out areas of risk, and suggest relevant protections
- What are the industry risks that may have an impact on our financial reporting? Companies within an industry may face similar problems that your auditor can identify.
- What are our key information technology risks and how good are our controls? While auditors are not IT specialists, it is important for them to give an overall assessment of an organisation’s IT function, including identifying and eliminating any points of weakness
- How do our accounting policies compare to our peers? Examination of this issue may allow your auditor to identify opportunities for improvement
- What do you do when you identify a problem? Will your auditor simply tick the boxes, state their opinion and sign on the dotted line? Or will they provide advice on how to fix any problems they identify?
Talk to the audit experts
LDB provides audit services to a wide range of organisations and entities, including public companies, self-managed super funds, other accounting practices and legal firms.
We work closely with clients to identify and solve problems, so to have your audit questions answered, call us on (03) 9875 2900 or fill out the contact form below and we’ll be in touch.