How and why an independent audit matters

Abstract

With each new fraud and ‘audit failure’ divulged in the financial press, more pointed questions are being asked about the value of the independent audit. Although many recognize that the audit profession plays an essential role in the functioning of the global capital markets and adds value to the roles played by other stakeholders in the financial reporting process, others contend that the value of the independent audit, and the measure of its relevance to investors, is measured only by the absence of fraud or failure of the business once the audit is complete. Discussions of audit quality tend to occur in the context of alleged audit failures, without recognition that the vast majority of audits stand the test of time. In answering the question ‘how and why an independent audit matters’, we have considered the explicit value of the final audit report and the importance of the consultative audit process. In addition, we have highlighted the fact that each of the principal players has a responsibility in the financial reporting and governance regime; that complementary interplay and responsibility to the investing public is essential to help promote investor confidence through reliable financial statement information. Financial reporting must continue to evolve to meet the needs of financial markets in the new world, whether that includes movement toward more real-time reporting with ever-changing technology or toward more principles-based standards. Independent auditors have and will continue to focus on improving performance, which is essential to effectively execute quality audits that contribute to the reliability of more timely and more useful financial information. In addition, it is essential that auditors continue to be positioned to provide assurance on financial reporting, in any format. As we move toward a set of global standards (accounting, auditing and independence), the value of the independent audit will continue to increase in influence as an element of efficiently functioning global capital markets affecting investors around the world. The views expressed in this article are those of the authors and do not necessarily reflect those of Deloitte LLP or any other organization with which they have been associated.