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1. Understanding the business of the auditee, its corporate defence, and value preservation is a cornerstone of a robust audit.
The importance of the auditor’s understanding of the business was emphasized by many who commented on the IAASB’s Invitation to Comment (ITC), Enhancing Audit Quality in the Public Interest. It sounds like an open door. But it was mentioned so often with a twofold background. First, the rapidly changing world that all businesses are part of. Several panellists in the next discussion will elaborate on that. Second, a concern that audits have become a “check-the-box” exercise. Standards and rules can be good guides—but the real journey cannot be predicted. You have to find out yourselves. That is the essence of auditing—your professionalism and independence.
2. Professional scepticism and professional judgment are key inputs to audit quality. Professional scepticism, as a state of mind and attitude, should govern the performance of auditors.
Professional scepticism is a fundamental concept and core to a high quality audit. The IAASB received many comments on this topic of the ITC. Illustration of both challenges and opportunities:
- Professional scepticism is about the appropriate mind-set of the auditor. It is relevant throughout the entire audit.
- A sufficient knowledge of the business enables the auditor to ask probing questions, more effectively challenge management, and identify when evidence is contradictory.
- Professional scepticism is about behaviour—how can auditors be encouraged to act as critical challengers? And how can quality control at the engagement level stimulate this, such as putting together a team with the right skills, expertise, and experience?
- Training and education is important to infuse a professionally sceptical attitude into the DNA of auditors.
- There is a strong link between professional scepticism and the role of the “tone at the top” and the “tone at the middle.”
3. “Audits are not dying yet, but they do need to adapt to the digital age.”
The impact of new technologies including data analytics on both businesses and audits can only be underestimated. The link between new innovative technologies and understanding the business with all its ongoing changes is obvious. But equally important is the impact on new audit practices and methodologies. The use of data analytics in the audit can lead to 1) better informed risk assessments, through understanding the business of the auditee and 2) more available evidence to support professionally sceptical behaviour.
4. The new auditor reporting with key audit matters cannot be encouraged enough. It innovates the audit by clearly speaking out to users. And it provides a link to wider forms of assurance on emerging external reporting, including integrated reporting.