The Value of Internal Audits

It’s quite evident that clients often don’t see real value in audit services. They’re often regarded as a necessary cost without much real value. Auditors often struggle to communicate to clients the real value of these services and, as a result, clients often question the fee associated with these services.

What many firms perceive as onerous obligations in relation to audit have also encouraged internal focus on cost management rather than assessment and communication of the benefits of the service to client. As a result, focus is often more on a standardised approach to minimise costs than on an effort to really add value to clients through the audit process.

Key triggers for adding value with audit are:

  1. Financial return on investment
  2. Insight into business processes
  3. Financial risk management
  4. Impact of strategic decisions

You should also be aware of the ‘soft’ emotional triggers that can have just as much influence on client perception of value. These may include:

  1. Effective engagement at commencement
  2. Transparency in relation to scope of work
  3. Proactive communication at all times
  4. A sense of shared responsibility
  5. The extent to which you understand their issues

Step 1- Develop a value proposition that engages with your audit clients

The value proposition is a clear statement of the real benefits of the service to the client. It should be presented in such a way that it engages the client. For example, the value proposition for business audits may be “We will provide assurance that the company is operating as management intends. We will provide insight for improving controls, processes and performance as well as for reducing expenses, enhancing revenues and improving profits.

Some of the broader benefits of audits may include:

  1. Act as a catalyst for conversations in relation to people, values, culture and communication
  2. Focus discussions on actions that will reduce cost and improve controls
  3. Allow for recognition of improvements that have been implemented over time
  4. Identify issues to be put on the table from the beginning of the process, with a real discussion about how to address those issues
  5. Allow for integration of issues from all sources to create one consolidated view of business issues
  6. Provide feedback on the quality of the risk management framework and processes
  7. Identify training requirements in relation to risk management and controls
  8. Provide regular insight into business performance
  9. Identify the potential future effect of proposed changes

Step 2 – Incorporate the value proposition into the client engagement process

To incorporate ‘value’ in the scope of work, you firstly need to have a conversation with the client about their needs and issues. By understanding where they’re coming from, it’s much easier to present a proposal that engages them. This means that you should avoid handing out the generic audit engagement letter that you’ve used in the past. By now, you can probably see how disengaging this can be to clients. No wonder they question the value of a service that just appears to be focusing on compliance.

Step 3 – Follow through with clients as the audit is completed

A key benefit of an initial engagement process that really tells audit clients what you will do and why is that it gives you permission to maintain communication with the client as the audit proceeds.  The simplest way to add value to the audit is to purposely gather information to discuss ideas for improvement with the client. This means that you’re creating a sense, in the client’s mind, that you’re working with them to address issues and uncover solutions. It means that at regular points during the audit process, you’re providing information and asking for feedback on what’s important to them.

Your next steps

To change the client’s perception of value, you firstly need to work on the value that your firm sees in the audit process. Ensure that you have the right platform in place to maximise internal efficiency. Involve your accounting and audit staff in discussion about what need to be done to really engage your clients. Develop a communications strategy focusing on your value proposition and then show your clients how you’re adding real value.

Of course no matter what you do in relation to engagement, some clients will just not be interested and will not see the value. Your challenge is to get through the work in as efficient a manner as possible to free up more time to add value to the clients that will value your engagement with them along the way.

Steven Watson | National Audits Group | www.nationalaudits.com.au

Steven Watson

Steven Watson

National Audit Director at National Audits Group
Steven has extensive experience in audit and accounting services having worked in the industry since 2002 across both public and private sector clients. Included in his impressive list of clients who he has serviced in auditing and corporate services comprises a selection of listed companies, large and small propriety companies, aged care organisations, charitable and religious organisations, schools, government departments and agencies.

With a friendly and professional approach, Steven is committed to efficiency, quality and effective auditing, and will ensure you receive the highest level of auditing and corporate support.

In addition to his role as Audit Principal at National Audits Group, Steven is also the Chairperson of the Audit and Risk Committee at Riverina Water and the Deputy Chairperson for the Audit and Risk Committee at Wagga Wagga City Council.
Steven Watson

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Steven Watson

Steven has extensive experience in audit and accounting services having worked in the industry since 2002 across both public and private sector clients. Included in his impressive list of clients who he has serviced in auditing and corporate services comprises a selection of listed companies, large and small propriety companies, aged care organisations, charitable and religious organisations, schools, government departments and agencies. With a friendly and professional approach, Steven is committed to efficiency, quality and effective auditing, and will ensure you receive the highest level of auditing and corporate support. In addition to his role as Audit Principal at National Audits Group, Steven is also the Chairperson of the Audit and Risk Committee at Riverina Water and the Deputy Chairperson for the Audit and Risk Committee at Wagga Wagga City Council.