Audit issues and trends to consider:

1. Regulated industries

It is often required in regulated industries that the regulator approve the auditor to perform audits within the industry. It is critical that the auditor obtain the approval from the regulator, prior to performing any audit work for audit clients in the industry; otherwise, the auditor may not be able to recover time spent on the work.

The Financial Sector Conduct Authority (FSCA) is very strict regarding this approval for the financial services industry, including insurers and retirement funds. If the auditor performed audit work before obtaining approval from the FSCA, the auditor would not be allowed to issue the audit report until such approval was obtained. If the FSCA subsequently did not approve the auditor, the client would be forced to obtain a different approved auditor to re-perform the audit and, therefore, incur additional audit fees.

Auditors are cautioned to avoid this by obtaining the necessary approval prior to commencement of audit work.

2. Laws and regulations

It is the responsibility of the management of the entity to ensure compliance with all relevant laws and regulations. The auditor must obtain an understanding of the legal and regulatory framework of the entity, and its industry, and the entity’s compliance. If the auditor identifies that the processes of management are inadequate, there is a risk that the entity may not be aware of all relevant laws and regulations, or that the entity may not be fully compliant.

It is, therefore, important that the auditor have a thorough understanding of the entity, and its industry to identify all relevant laws and regulations, and evaluate their possible impact on the financial statements. In some industries, there may be multiple laws and regulations relevant to the entity, and the auditor may easily miss some of these, if due care is not taken.

The auditor must remain aware of possible instances of non-compliance, and perform additional procedures, if non-compliance is identified, or suspected.