It is a “cop-out” to say that statutory audits cannot be further improved to help stave off crises and reduce fraud say Mark Hucklesby, National Technical Director of Grant Thornton New Zealand.
“The audit landscape in New Zealand has changed dramatically over the last 12 months” he said.
It began with the Government creating an External Reporting Board – an entity to independently govern the development and issuance of auditing standards and then it passed the Auditor Regulation Act 2011.
What this unheralded piece of legislation did when it came into effect on 1 July 2012 was to ensure that the auditor signing off audit opinions on companies that raise money from the public are experienced business professionals who understand the consequences of poor governance and control.
While Hucklesby said it’s unrealistic to expect auditors to stop all fraud or bad behaviour in companies, a good auditor can and does help reduce opportunities for, or expose, risky behaviour. “If they are not doing this, then you should challenge them and ask them why” he said.
The Ministry of Economic Development is also acknowledging the value of audit by suggesting in a recently released discussion paper that any registered charity with annual expenditure greater than $300,000 per annum must now be audited by a currently registered chartered accountant.
“No longer can an audit be left to enthusiastic amateurs” said Hucklesby.
“The Government is saying now that if you raise a significant amount of money from the public, either by way of a donation to a registered charity or from issuing a prospectus or investment statement, there must be audit scrutiny.”
“I’ve been involved in audit all my life and I think the profession can still do more. Generally speaking, auditors sit on a huge amount of really useful information that would be a great interest to management and owners, but it’s rarely asked for or discussed.
While many view an audit as a commodity service that simply adds unnecessary compliance costs to organisations, the reality is that auditors will continue to play a pivotal role in assessing the quality of this country’s financial statements, and if they are not, you should be asking why?