A Poorly Conducted Audit: Who is to Blame?

The regulatory environment in which the external auditor finds themselves in, is onerous to say the least. Why is that? Well, it all has to do with audit quality; audit quality is directly associated with how expertly an auditor performs an audit. Apparently audit quality according to audit regulators and the auditor’s customers – the business community, government, banks, and investors – has been deteriorating to such an extent over the past 10 years, that new laws had to be enacted and fines increased to “bash” the auditor into submission so that they can perform and audit better. Well, these new laws and regulations are not going to work at all. Because the auditor is not per se the problem.

In order to lay the blame for such a poor state of affairs and what is that state? An auditor’s quality is reflective of the auditor’s skill in how to conduct an audit, which is almost non-existent in current times. Simply the auditor does not know how to audit.

To explain what I mean, I must start at the beginning when g-d created Adam and Eve. I am going fast forward to when Adam and Eve start Grade 1. The role of the school system is to explain to Adam and Eve about quality, how to gain the skills and competence to achieve such a goal. Examples are diligent, that is why there are exams, be diligent and study and you will be promoted to the next rung in the ladder. There are 12 rungs to this ladder culminating in the matric exemption to go to university. After 12 years of strenuous diligence Adam and Eve gain a matric exemption which is the pinnacle of those 12 years, which is a school leaving certificate – a certification by experts that the Adam and Eve have the ability to become professional persons. Adam and Eve have passed the quality test (not audit quality) just the knowledge that they have the skills and competence to gain professional quality.

Adam and Eve decide they want to become an auditor registered with the Independent Regulatory Board for Auditors. Adam and Eve do concern themselves with the auditing regulatory system as they have after 12 years have enough quality to withstand whatever laws and regulations the face. They start first year at university to obtain audit quality, to obtain the skills and competence to perform and audit. This process to obtain audit quality is for those who pass all their exams first time is a 8.5 year process, a process that takes as long for a learner to become an orthopaedic surgeon. The process of obtaining audit quality starts with a 3-year undergraduate degree, a one year post graduate degree, 4.5 years of practical training. During these 4.5 years of practical training with a IRBA registered audit firm the learner is subject to three professional exams and the submission of a portfolio of evidence. If at start of first year university the auditing hopefuls made up 1000 learners, after 8.5 years there cannot be more than 100 learners left that become registered external auditors. . However, that’s not all of it, during these 4.5 years of practical these young professionals are subject to a strict regimen of training, off and on the job. They gave to satisfy a long list of skills. It can now be officially confirmed by the auditing profession that these young professionals are now the elite the best of the best in audit quality. According to the experts they are. However according to there customers they are a total failure in audit quality.

Just be remined the process of becoming an external register is equivalent to becoming an orthopaedic surgeon. I do not see a public outcry about medical quality, but the audit quality outcry is as if the world has come to an end, and may be it has.

Whose is to blame when the auditor conducts an audit; one well below the standards expected by the public and the regulator? Who are the persons of interest or the prime suspects in this blame game. The first person that always is to blame whether it be the public or the regulator is the auditor. Well, who else could be to blame? It seems obvious does it not? No, it is certainly not obvious.

There is a saying the blind leading the blind. Those who educate the newly qualified auditors went through the same process as the newbies. They have learnt nothing about how to conduct an audit that will satisfy their customers and that is reflective of those strenuous years of becoming an auditor. There is no audit quality according audit regulators. So those long years the potential auditor has been led off the garden path by educators who do not know how to perform an audit. It’s the blind leading the blind. On reading the audit regulators reports, it is easy to determine that auditors are making “schoolboy errors” errors that are basic and fundamental to performing an audit.

Yes there are those auditors in a micro audit firm who make these errors but in magnitude the errors fall far below the errors made by the Big 4 auditing firms, who are the best of the best of the best. Almost all audit failures that the auditor does not know how to conduct an audit the best of the best are implicated.

Now let me take you back to the question. These auditors are subject to a process of obtaining quality and audit quality of 21 years and many years of strict legislated training. How is it possible for auditors to so incompetent?

Can you not read between the lines I have just written? Who is to blame for poor if not criminal negligence audit quality? It is the one profession that was not called to account by the Zondo Commission for audit failures: the EDUCATORS.