Is audit an emotive term?

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For many people their experience of audits is of external audit, which to a large extent is a forced purchase required by law. For the uninitiated an external audit is carried out by an independent firm of accountants and its main focus is forming a view on whether the annual accounts give a true and fair view. It can be beneficial to businesses in the following ways:

  • it should provide stakeholders with confidence in the accounts and may even help improve a business’s credit rating
  • it provides a focus for staff to make sure the accounts can stand up to outside scrutiny
  • it potentially provides an MOT check on a business’s accounts and aspects of its finance function

however for many directors these are not very tangible benefits.

Whilst the end product of an external audit is a fairly standard publicly available report on the annual accounts, there may also be spin offs of recommendations for improvements along the way. However these recommendations are a by-product and not the main purpose of the audit; the extent of recommendations will also depend on how the auditor’s work is approached and the experience of the staff involved.

Internal auditors can be employees of the company.  The company can set the agenda and focus resource where it matters it may extend into operational areas. In other words internal audit can be used proactively and contribute to business success. I was recently introduced to an organisation who were looking for some internal audit help. The projects reminded me about just how much value can be added when audit resource isn’t handcuffed towards the annual accounts!

The combination of my financial management and past audit experience is a pretty strong mix for this type of work and I started to ponder on whether there is a market for internal audit services.  However I was also concerned from a marketing perspective that auditors may be viewed in a negative light.  Was I right?

I decided to carry out a LinkedIn Poll. Participants were asked what most closely describes their feelings when they hear the words “audit” and “auditor”? There were three possible answers:

POSITIVE, beneficial to the business
NEUTRAL, a few benefits
NEGATIVE, waste of time & money

The results surprised me, at the time of writing 110 votes have been processed.  41 people have voted positive, 51 neutral and only 18 negative. I am however taking the results with a pinch of salt as it is clear from the comments posted that a number of auditors voted!  Nevertheless the comments do provide a useful insight.

Perhaps most telling from my perspective are the following remarks:

…..”I tend to see the word Audit and think of history. Whilst one can learn from history and prevent errors that went unrecognised from re-occurring I prefer to look forward and hopefully improve Corporate potential. To this end I would prefer to recognise Internal Audit as being Business Process Analysis & Improvement.” Graham Smedley

“As an NED who chairs a number of audit committees, my advice would be to strengthen risk management and internal audit – it would be much more useful [for annual accounts] to disclose the amount spent on these functions rather than know what the [external] audit fees are!” David Young

Graham’s comment, makes me wonder if “audit” is an emotive term. In any event I am not sure how many people realise there is more than one type of audit…perhaps it’s time for another poll!

Finally I would like to thank all of those who participated in the poll and discussion.

For further information please contact me, David Lewis, on 020 3137 2279 or e-mail mail@camroseconsulting.co.uk.

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