Audit: In or Out?

This is a comment I made to an AFR journalist, it was printed in the AFR a few weeks ago, after which I was asked what I meant.

My response is,

Audit is very risky, especially if you are only doing it on a part time fashion.

The time pressures associated with audit work and deadlines, means it can be difficult to fit it around other compliance work.

Audit is price sensitive, so unless you are confident you can negotiate profitable fees, you would be better off doing other work.

To successfully undertake audit work you need audit software and data mining resources, these fixed costs require considerable audit fees.

Staying up to date technically is extremely time consuming, so if you are trying to cover tax, superannuation company law, etc, as well as accounting standards and audit regulations, there is too much non chargeable time, unless you have considerable audit fees.

Staffing can be difficult, you need to obtain, train and retain good audit staff. Not easy.

Undertaking audit fees can increase your PI Insurance premiums and mean more frequent Quality Control reviews, so again, substantial fees are needed to support this.

That is my suggestion, do you have a response?

 

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For Accountants

The official account of For Accountants, an online resource specifically designed for accountants in public practice.

1 Comment

  1. Dale Crosby

    The price sensitive nature of audits is a significant challenge to both accounting firms and independent auditors. It’s critical that anyone wanting to be in audit is able to express clearly the value of the audit. The audit is not just a tool to manage risk, it’s a valuable engagement tool to have meaningful discussions with clients in relation to people, values, culture and communication.

    I think a key challenge for the industry is deciding whether they are prepared to allow price sensitivity determine the quality of audits. Regulation has its role in this, but in the end it comes down to individual responsibility, doesn’t it?