Providing trusted services beyond the year-end audit
Increasing demand for assurance and validated information
The economic environment around audit is fast-paced. Constantly growing requirements and regulatory change have triggered a massive increase in economic and societal complexity. Digitalisation and the use of new technologies have brought about a transformation of audit services in recent years. Today's audits are more efficient and effective thanks to support from digital expert systems with functions like data analytics or bot solutions.
What are the auditor’s tasks?
Auditors assess complex business matters, which can vary depending on the circumstances and specific tasks. Companies and other stakeholders, quite rightly, expect auditors to deliver high quality. Audits are performed in accordance with generally accepted standards. They are project-like in that they have a clearly defined beginning, process and end.
Issuing opinions on a company's annual financial statements is the auditor's core business. In many cases, this will be part of a statutory audit engagement.
Given their role, auditors gain a comprehensive and deep understanding of companies and their operating environments. It means they are well placed to offer specific advisory services, ensuring independence at all times and observing an appropriate critical distance.
Besides the year-end audit described above, organisations are increasingly seeking assurance services and audit-related services.
Trust services (assurance)
Private or listed companies, banks and organisations in the public eye increasingly need assurance on corporate information beyond the scope of the annual or consolidated financial statements. Examples include sustainability reporting, process, workflow and system assessments, and confirmation of Compliance Management Systems (CMS) or adherence to debt covenants. Legislators and federal offices as well as state and public administrations also want external assurance on compliance with legal or regulatory requirements. The most recent example is the equal pay audit (Gender Equality Act).
Assurance services should help business leaders reach decisions, and support interested third parties or authorities in meeting their duties. In our age of data overload, it’s about creating certainty and trust by having an external provider validate and certify certain information. There are good reasons to invite an independent auditor to examine the facts and figures. The level of assurance will depend on the degree of reliability required, taking into account how much effort - and cost - would be reasonable for the paying party.
When performing agreed-upon procedures, the auditor reports on findings relating to specific areas agreed upon with the client. The client remains responsible for the appropriateness of the procedures performed, the assessment of factual findings and any conclusions drawn. This means that no assurance is provided, in contrast to the audit or review. Such engagements address clearly defined aspects requiring independent clarification.
A review offers a lower degree of assurance than an audit. It can be carried out on the financial statements or, if the situation allows, designed to examine specific financial or other corporate information. The review is agreed and then performed based on interviews, plausibility testing and analytical audit procedures. This type of examination offers limited assurance and, accordingly, the audit opinion is worded negatively.
An audit demands a high degree of certainty on whether financial or corporate information is adequate, the company complies with regulations and systems function effectively. Auditors meet this expectation by considering more in-depth procedures such as detailed and system audits to complement interviews and analytical audit procedures. This reasonable assurance is reflected in the positive wording of the audit opinion.
Trust between auditor and stakeholders is essential for all services, and this is something that develops in an environment of transparency, certainty and reliable information. Trust is the basis for any constructive working relationship and lays the foundations for an effective economy. Audit makes an important contribution to this basic requirement.