Why Is Audit So Easy?

Confidence

Very few auditors and students have the confidence to perform their duties. The key to being a good auditor or auditing student, is to become a professional auditor. Not on paper, but in their mind, and their whole being.

A student that wakes up in the morning and sees a fearful student in the mirror, trying to motivate him or herself to do well in the exam, or at work, is already at a disadvantage. But students who see themselves as audit professionals, learning the craft and seeing it as a never-ending journey, is guaranteed success. They will dress and act accordingly. Be inquisitive and searching. Contribute to their teams and firm. See their mistakes as stepping-stones.

The same goes for audit managers and partners. The learning process never stops and it should cause teams to respect each other as fellow professionals and not as seniors and juniors. Work together as a team and share knowledge and experience of the client. Most audits I review have a kick-off meeting, sticking to the agenda as set out in the standards with absolutely no information as to how things can go wrong on the audit. Remember it is a continuous learning process for all. Keeping the bar at the same level for everybody energises teams into motion with astounding results.

Know the business

Computer programs and audit standards have become the sole measure of performance and auditors have lost sight of the main purpose of auditing, which is to know your client and the business, listen and communicate properly with client and team, test information obtained, and give an opinion. Auditors are notorious for hiding behind their laptops and not being passionate about knowing their clients and the industries they are in.

Most serious audit failures, in my opinion, are not due to the non-compliance of a standard. Yes one will definitely find a standard that was not complied with, but the root cause is team members not knowing the clients, their business, what makes them tick, what can go wrong, and what is not recorded in the financial statements.

It is very common to see an audit being approached the exact same way for years on end, with no reference to what was done to find out more about what has changed in the year, systems that have been implemented, changes in products, etc. I have changed audit approaches for clients from laborious, energy sapping, substantive approaches, to simple, system based, and practical approaches, knowing exactly where the business is prone to errors, and where the client actually also benefits from the audit relationship.

Auditors will be well served to put their client’s business hat on, and think how they make a profit, and how they implement systems to achieve that. With that will come a sense of the client’s integrity, and natural scepticism, which are requirements of our code and standards, but impossible to apply from behind a computer screen.

Know the basics of auditing

If you really think about it, auditing is only about making sure that all the assertions for all the balances, transactions, and disclosures are not materially misstated. No, you say, but what about all the other required procedures? You have to assess client continuance, the adequacy of the team, document and assess IT controls, look at subsequent events, etc. It is all for the same purpose. To make sure that nothing is materially misstated.

So when you are busy in a section that is not related to a specific balance or transaction, like assessing overall controls, go to the required section of ISA 315 and make sure the required procedures are adhered to, and that you understand the section you are busy with, and the purpose of audit programme procedures. Then keep in mind how it affects something to be misstated and adapt the audit approach. The required sections of the ISA’s are very short and with time you will know them well.

When you are busy with a balance or transaction, communicate with the team members who performed the planning, as well as the client, and determine where something can go wrong. Remember the assertions related to the balance or transaction and address each one according to their risk. Look at the relevant section of IFRS and make sure there are no assertions hidden in there being overlooked.

Do not use the computerised methodology as a crutch to wade through your section blindly. Look at the ISA’s, look at the IFRS section, consider the assessed risks and focus on those areas first. It does not take a long time, especially once you get used to it. I use no more complex way to review audit files. As a professional auditor on a continuous path of learning, there is no other way to do it.

Know your ethics

In this day and age where religions tend to play a lesser role in our society, we are battling to come to grips with the concept of ethics and how to control it. Ethics is the core of our profession. As with any other standard or legislation, one should know the purpose of it. If you learn it as a student, it will just be another list to remember. If you learn it as a professional auditor, and understand its purpose, it will become part of your being and you will be somebody on whom the public can rely for a fair opinion. This is the part of the profession which is most difficult as one can only look at your own heart to assess your actions, without being distracted by other business practices and social norms.

The reliance on our profession by the public is enormous, and the opinion we give should be well considered and objective. Then is not the time to look at what was done in the prior year, or what others would do. It is the time when only the right decision counts.