Audits of the Future
Maintaining relevance is important for business survival in any market. As consumer, investor and other stakeholder needs evolve it is key for institutions to transform with them in order to offer the greatest value possible. Audits have typically been rather standard processes that aim to confirm validity and accuracy of information in order to provide stakeholders with assurance and build their confidence, however, as people’s interests and needs change should audits adapt as well?
The core function of financial audits is to assess historical data and make sure that what is being reported is correct. While this function is extremely important to help uncover any malpractice or operational deficiencies what stakeholders, especially investors, are becoming increasingly interested in is the future outlook, and in the same way that past performance is audited for accuracy shouldn’t projected performance be equally scrutinised?
A company’s survival depends on more than just how it performed in the past, it is a combination of that as well as other factors such as economic outlook, strategic plans, etc. In order for audits to maintain the most relevance possible, future prospects may also need to be assessed for accuracy to give external stakeholders a sound idea of where an organisation may be going and to help internal stakeholders identify gaps in their chosen paths, not just the gaps from past occurrences.
As with most things that are highly nuanced, executing this is often easier said than done. With uniformity and generally accepted guidelines being key to accurate and consistent audit reporting, it would prove somewhat challenging to devise principles that can be applied across the board when assessing prospective future performance. Forecasting is a highly subjective game, so placing rules on how people perceive things would be no simple task. While we are still some ways away from implementing forward looking audits on a wide scale these kinds of audits have undeniable value and some companies may want to consider implementing it at an organisational level.
Remaining relevant to the people we serve even as auditors is vital to ensure the most value addition possible for clients. Whether it is an internal or external audit validity is key and being able to provide stakeholders with assurance of not just past but future performance as well is important. Though putting this into practice may dance on the line of practicality, it is an important conversation that needs to happen at an industry level but also at an auditor to client level so as to ensure clients’ specific needs are being met. As Baker Tilly we are more than just your traditional auditors; while our aim is to assess and provide assurance of historical information our primary objective is to create real value for our clients and we are always interested in hearing from you how we can do better at doing just that.