WHY AUDITORS RECOMMEND THEIR CLIENTS TO FRS
Here’s a quick exercise to ascertain whether you should consider contacting FRS to assist your audit clients.
Run your eye down the following list. Picture in your mind the conduct of individual audits on your client list and tick the boxes that give rise to any concern or represent an objective on any of your clients.
If you ticked any box (even just one!), you should consider getting FRS involved. We can alleviate audit concerns and assist in the streamlining of the audit process through our superior financial report compilation services.
Poor quality client reporting can compromise independence
It is a well-known fact that an auditor needs to be independent of their client when conducting the audit of their client’s financial report. If you are an auditor, it is sometimes evidently clear that your clients are not in the business of producing financial reports. What they deliver to you can sometimes leave a bit to be desired and introduces risk to the audit process, not only in terms of audit risk, but also cost blowout and independence concerns.
For example, typical deficiencies in your clients reporting might include:
• opening balances that don’t agreed to prior period closing balances
• disclosures missing
• reconciliation disclosures not reconciling or agreeing to ledger
• accounting transactions incorrectly recorded or otherwise misposted
• transactions completely disregarded because the client does not have a sufficient knowledge of Australian Accounting Standards/International Accounting Standards.
Invariably, the auditor can find themselves holding their client’s hand and risk becoming too involved in the financial report preparation to get their audit completed.
These issues can RISK THE AUDITOR LOSING THEIR AUDIT INDEPENDENCE. The auditor can be left exposed to the risk of breaching their own firm’s internal quality control processes, or worse, being detected by the Australian Securities and Investments Commission (ASIC) in their surveillance activities.
ASIC surveillance activities over auditors and client financial reports are well known, well publicised, and can significantly damage the reputation of both the client and the auditor. Auditors can be penalised should they have been found to have breached Auditing Standards and the Corporations Act through having their license suspended, being named and shamed in an ASIC Media Release, and being required to submit to hours of training under an Enforceable Undertaking order made by ASIC.
AUDITORS – DON’T EXPOSE YOURSELF TO THE RISKS OF GETTING INVOLVED IN YOUR CLIENTS’ FINANCIAL REPORTING