Renewal of the Audit Focus

Renewal Of The Audit Focus: Is It Time Yet To Change The Bedrock Of Auditors’ Roles And Responsibilities?

Expressing an independent audit opinion on the financial statements, obtaining reasonable assurance, and providing recommendations to improve weak controls are among the significant roles and responsibilities of the Auditors. But is this it? Accounting scandals over the years have given quite a thrust to auditors under spotlight for not many good reasons against the backdrop of undermined public trust and rising expectations. There is ongoing global concern that auditors are not doing enough to detect material fraud.

Investing public ask, ‘what do you call an accountant with an opinion? And they reply, ‘An auditor’. This perceived mindset have given rise to the expectation gap in audit which is ‘the difference between what the public thinks auditors do and what the public would like auditors to do’. The public perceives audit as part of the solution for preventing company failure and demands more responsibilities from auditors in identifying and reporting fraud.

It is universally known that entities and corporates have been pacing up with the technology every year to bring in audit efficiency and productivity for best outcome, one of which is client expectation. However, the focus on audit approach and strategy has remained linear all these years not exclusively comprehending how the funny business has been passing the going concern test every fiscal year.

It is time to change the bedrock of the auditors’ roles and responsibilities to a more rigorous approach which should enable an auditor to detect fraud meaningfully. Audit procedures have never been designed to detect fraud; to do so, it is likely possible if the auditor is both, a statutory and a forensic auditor.

From auditing sales and other invoices on sample basis to being adept at recognizing baked numbers, suspicious transactions and fake documents would enhance the role of audit, auditors should always strive to look beyond the numbers particularly the entity, its culture, and people when planning and testing for the existence of fraudulent financial reporting.

As we advance with technological developments in various industries, the fraud techniques have also advanced with the same pace. In today’s era of disruptive technological change has led to the emergence of triple entry accounting (TEA) and soon will be architectured into the system through blockchain technology. This may diminish the need of statutory audit. To keep audit up and running, adapting forensic approach will be a value add.

However, to parallelly perform the dual roles of the statutory and forensic auditor one should find the right balance between the roles during the audit process. Also, the extension of this audit role would demand additional time, a rigorous fraud risk assessment and likewise.