The Right Process

2020-03-11 - 09:55

The objective of an audit is to provide investors and other stakeholders with reasonable assurance as to whether the financial statements, taken as a whole, are prepared in accordance with the applicable financial reporting framework and are free from material misstatement.  Audits help directors and others responsible for oversight of a reporting entity to assess the robustness of the financial information prepared by management and obtain critical insights into an entity’s financial controls and associated risks.  Audit and assurance services have evolved—and they must continue to do so—in order to meet the ever-changing needs of stakeholders. 

  • IFAC believes that audit stakeholders—particularly company boards, governing bodies, and management—should view audit as a value-added process rather than a compliance exercise that simply results in an audit opinion on the financial statements.  Through the process of conducting the audit, the work of management in preparing reported information is examined. The process should enhance confidence in the assessment of risks, estimates and valuations, internal controls, data gathering, and how management is held accountable.  We support efforts that enable the auditor to deliver greater transparency and value in the audit report—for example, requirements to communicate Key Audit Matters (under ISA 701) and Critical Audit Matters (under PCAOB AS 3101).
  • IFAC believes that the use of technology should enable high-quality audits.  Technology-driven tools can facilitate a more comprehensive examination of virtually all transactions and significantly increase the efficiency and effectiveness of audits.  Applying technology to audit methodology can enhance the identification and analysis of high-risk matters that require specialized expertise. However, the application of technology to audit is unlikely, on its own, to lead to providing more than “reasonable assurance” nor always lead to the detection of fraud.  Standard setters must continue to progress work that addresses advancements in, and the use of technology by audited entities, as well as how automated tools and techniques can be used in audit and assurance engagements.
  • We embrace the evolution of assurance services that better meet the needs of investors and a wider stakeholder group, —including assurance of internal controls and risk management systems, fraud detection or forensic reviews, forward looking / going concern assessments (including ability to pay dividends), digital reporting, “non-GAAP” metrics, and reports or disclosures that enhance corporate reporting (including information reported under the International Integrated Reporting Framework).   As the market need for these services evolves, and frameworks for the provision and assurance of such information are developed, organizations should benefit from these assurance  engagements and regulators should consider what level of oversight and assurance is appropriate.