Choosing the right external auditor is an important decision. You’ll work with your external auditors year after year and their insights are likely to be integral to your organisation’s success. How do you choose the right auditor?
An external audit should deliver much more than business compliance. To really add value for your business, auditors must bring the right combination of qualifications, experience, technologies and approach to the task. Here are some capabilities that you should look for.
Criteria for choosing an auditor
1. Qualifications
When an audit is conducted for the purpose of meeting an external regulator’s requirements, it’s essential that the lead audit partner meets the conditions that the regulator requires. For example, if your audit is to comply with ASIC requirements, only a registered company auditor (RCA) can conduct your audit. To ensure your auditor is registered, you can check their details in the professional registers section of the ASIC website.
2. Industry experience
If your auditor has experience within your industry, it will typically translate into a more efficient audit and avoid generic questions being asked. It will also enable them to provide more relevant value-added services and translate their analysis into concrete actions that your business can take. Continuity of audit staff working on your organisation’s audit will also enable a more efficient audit year-on-year.
3. Use of technology
If your auditor isn’t using technology and data analytics to perform your audit, you’re missing out on important insights into your business. Technology can digest entire data sets across large organisations, more quickly finding anomalies and freeing auditors to assess their findings, interpret the data, and focus on the business implications. This means you’ll receive more proactive advice and future-focused action items to improve your business operations.
4. Quality assurance processes
Any auditor you choose should be able to demonstrate how they ensure their professional service quality – their compliance with relevant legislative requirements, auditing standards and reporting best practices. For example, are regular peer review procedures in place? Do the audit partners and staff attend regular technical training, professional development in-house and externally?
5. Reasonable fees
When choosing an auditor, the fee is often a key decision factor. However, ASIC has emphasised that it is important for business directors to ensure the audit fees are adequate and don’t have the potential to adversely affect the quality of the audit. I have come across cases where financial reports are held out to be audited but the auditor was either not a registered auditor or the ‘audit report’ issued was not the correct report to meet regulatory requirements! You do get what you pay for.
6. Reputation of the audit firm
Testimonials, references or awards are a good indication of an audit firm’s reputation in the industry. For example, the Australian Financial Review Client Choice Awards are voted by executive level clients of audit firms such as directors and senior management and reflect your peers’ opinion of the services received. Accru is honoured to have received The Australian Financial Review Client Choice Award for four consecutive years.
7. Ongoing support for decision-making and growth
A good auditor is also a business advisor in regular contact with you throughout the year to bring to your attention matters that are relevant to your business. Agile decision-making often demands real time data. This is where your auditor can help. Additionally, audit firms who are part of a global professional network can add value further down the track when you decide to expand your business internationally.
While external audits are a regulatory necessity for some entities (see below), a good external audit delivers more than business compliance and reporting results of past financial measures. Your auditor should be a business partner who is able to provide deep analysis, assurance and future-focused business advice. After all, there is a reason that a windshield is so much larger than a rear-view mirror!
Read our article Can an audit actually benefit your business? to find out more about the benefits.
Accru auditors naturally strive to excel in all the above areas and deliver audit outcomes which exceed clients’ expectations. Please contact us if you would like to know more about how an audit could benefit your business.
By Jean Zhang, Accru Felsers Sydney
Entities who need an external audit to meet requirements for external regulators
- Public companies
- Registered schemes
- Large proprietary companies
- Companies limited by guarantee
- Small proprietary companies that are foreign-controlled
- Australian financial services (AFS) licensees
- Larger charities
- Larger co-operatives
- Larger associations
- Holder of authority to conduct a fundraising appeal
- Self-managed super funds (SMSF).
A few exemptions can apply.
