What is the value of an audit?

A stand out moment for me from my accountancy training (20 years ago) was my lecturer explaining that the Latin word to 'check' is audier, which is where we derive the word - audit. In other words an audit is a check, a check on records, statements and/or reports. There are many different types of audit, internal, statutory and independent etc.

If you're a limited company you have to file your report and accounts that have been independently audited, by a registered auditor, to verify them as a true and fair view. If you're an investor, the integrity of the audit is one of your safe guards - on the accuracy of the numbers at least. It won't stop anyone making a duff decision, a poor decision making process is still a poor decision making process but you can use the numbers in good faith.

And in the world of Qualifying Workplace Pension Schemes, we now have the Master Trust Assurance Framework (MAF). The interesting thing about the MAF is that it is voluntary and that it focuses on the current processes and controls in the operation of a Master Trust against a benchmark set by the TPR.

In a world trying desperately hard to manage risk how does an audit – or independent assurance - help an employer, who is new to the pensions market and looking for a QWPS for their staff?

Firstly, it shouldn't be a marketing badge or logo, it is a serious piece of work designed to enable employers and their advisers to perform due diligence and give them reassurance of their decision.

Secondly, it should do what it says on the tin - a check of existing process and controls set up by the scheme against the benchmark set by the TPR. Controls are important. Without them a process is like a fire hose with water pouring out of it, but with no one to take control of it or to point it in the right direction it is of neither use nor ornament!

Thirdly, this is not a 'one and done' thing but an on-going process ensuring standards are met and shining a spot light on those areas not quite up to scratch.

Therefore what value does an audit or assurance process like this bring?

You can draw a line between a scheme with a culture of good governance being able to drive out good member outcomes. It’s the beliefs, standards, processes and controls it adopts which enable that to happen. The impact of an annual assurance report, with integrity at its heart, keeping operations under the microscope will help everyone whether you are an employer, trustee, adviser or member. MAF should be embraced by those who are confident of their governance processes and it should give reassurance and confidence to their customers.

At NEST we have followed the guidance set out by TPR on governance assurance. We first published a voluntary governance statement in November last year and we have now completed the next phase in this work. We recently published our master trust assurance report based on an independent audit by KPMG against the MAF.

https://www.nestpensions.org.uk/schemeweb/NestWeb/public/whatisnest/contents/Independent-quality-assurance.html

I hope you find it useful……Certo Cito....