Auditing- Not Just a Mandatory Task

Audit

The literal meaning of the word “Audit” is examination or inspection of books of accounts by an auditor. It also includes other procedures like inventory check, process controls analysis to make sure that books of accounts represent true and fair view.

Why Audit?

Audit is a check on all the activities running in the organization and controls operating in the organization. Audit function also identify the requirements for further improvements. Following are the prime benefits of conducting audit:

·        Creates a check on fraud and errors

·        Increase the reliability on financial statements and business

·        Timely correction of errors

·        Timely compliance

·        Streamline the financial statements according to the business processes

·        Improvising the business processes

·        And So on….!

These are just the few benefits that can be easily achieved with the help of “Regular Auditing”. Even though we have list of benefits from conducting regular audits but still “Audit be considered as mere a mandatory task for the purpose of fulfilling the compliance’s requirement”. Not just the small organizations but also the big organization having millions of turnovers are considering audit activity mere like compliance's requirement which is mandatory as per the laws.       

Few days back I was discussing the same question with the Managing Director of very big company that Whether Audit is "just a periodical task and waste of time" or "an opportunity to do some improvements/ betterment " for your organisation?

After thinking for a while, he replied very cleverly that for our organisation “conducting audit is a continuous activity”. From past few years’ compliance's are getting strict due to which the requirements of number of audits are also increasing. Increased requirement of audit also results in increased professional fees. But all such increases never help us in doing business and even no improvements, suggestions and value additions. Just to add “from Satyam to ILFS nothing has changed except the law and the professional fees of Auditors”. He concluded that for us Audit is just a regular activity that has to be completed within the prescribed timelines.

After this whole conversation, I have posted the same question on LinkedIn to get the view from different professionals. Here is the link:

https://www.dhirubhai.net/posts/divya-chugh-19a15949_audit-internalaudit-financialaudit-activity-6596114184633716736-sgps/

I have received different comments/ views from various professionals which help me in deciding that -why audit is not considered as important as it should be from a businessman prospective. Here are some of the reasons that I have jot down from all those comments:  

1.      Auditors are conducting monotonous work every year and not giving any value additions

2.      Auditors are creating fear of Tax Authorities and Law Makers

3.      Auditors are not involving businessman ‘s while conducting audit due to which businessman never understands the importance of audit.

4.      Mandatory nature of audit by the law reduces it significance.

These are some few aspects which undermine the audit activity as well the professional ability of the auditor. We all have to transform the credibility of Audit activity form “a compliance-oriented task” to “acceptable and quality task”.

Few of the solutions are:

·        Periodical Audit (Monthly, Quarterly, Half Yearly)

·        Use of New Audit Techniques (ARP and Audit Analytics)

·        Avoiding last date working and pressure

·        Delegation of work as per the professional capacity of the Auditing Staff

·        Monotonous checklist should be replaced with the dynamic checklist that too Client Specific

·        Avoid just pointing the problems, instead provide the best workable solution.

Conclusion: 

Auditor is a watchdog and not the bloodhound but if we just watch and report the problems to the businessman, it will create another problem for them until we give them the best possible solution. Until and unless we provide them the value addition, we are the only one who are responsible for taking audit “just as task” not the businessman. 

We all have to work towards the quality of audit and always question our self that:

What is the expectation from Audit? And whether we are doing more than that? Only when we are doing more, it will create a value addition for the businessman.