Some legacy issues come up now and then on the news, but we are hopeful that the days of audit failures are behind us. How do we continue to ride this new wave, as it were, and retain the momentum?
Auditors are regarded to be independent gatekeepers for investors and shareholders. This is potentially why there is usually an expectation gap between what auditors’ responsibilities are and what the market thinks are the responsibilities of auditors. How do we narrow this gap and ensure that everyone in the financial ecosystem wins?
A lot of research has been done on human behaviours and the financial ecosystem. Some may say let’s keep telling the good stories of what auditors do, while others say let the entire financial ecosystem be trained on their respective responsibilities to ensure good governance and accountability. The one fact that remains unchanged is that one audit failure results in a negative perception of the entire profession.
Would a centre of audit quality shift the eco-dynamics? Would it assist our profession in ensuring that all members of the financial ecosystem are held accountable? Let’s explore this thought further.
The main purpose of having a centre of audit quality is to enhance public trust and promote high-quality financial reporting by the profession. The role of auditors will continue to be critical when it comes to financial capital markets in protecting investors and the public at large.
Investor confidence and trust in capital markets have a direct or indirect correlation to the state of affairs of any organisation − which in recent years usually means the audit opinion will increase or decrease investor confidence, which in turn will affect the shareholder value. For example, an audit opinion that consisting of several key audit matters highlighted by auditors from internal controls to liquidity issues would make any investor uncomfortable to invest in a company, and those investors that already have a share in the company could look to dispose of their investments.
Over recent years our profession has noted an increase in regulations intended to mitigate and protect the public from audit failures. This has put a strain on the profession, as we see fewer individuals who want to be registered auditors.
Changing landscapes driven by drivers such as ESG reporting, new technologies, and globalisation demand that auditors continue to upskill themselves to remain relevant in the current environment or face being extinct. The establishment of a centre of audit quality may be the answer to the call or the missing puzzle.
For example, in the United States, the purpose of the US Centre of Audit Quality includes being responsible for driving the following:
Does the profession in South Africa need a voice that will speak on its behalf when controversial statements are being made with regard to auditors and to drive the necessary culture in the profession that will enhance investor confidence?
