The Essential Checklist For Choosing An Auditor: 7 Ways They Must Safeguard Your Organisation
In Australia’s evolving business landscape, the role of auditors has become more crucial than ever. With recent changes in climate-related financial disclosures and sustainability reporting, it’s essential to have confidence that your auditor is not just keeping up, but staying ahead of the curve.
As of 2024, Australian law now mandates climate-related reporting for companies required to prepare financial reports. The Australian Accounting Standards Board (AASB) has also finalised two significant sustainability reporting standards.
These changes underscore the importance of having a trustworthy and reliable auditor who not only acts as a guardian of your organisation’s integrity but also proactively ensures compliance with new regulations. So how can you be sure your auditor is meeting all your needs, especially when it comes to areas you might not even be aware of?
This article provides a checklist of seven critical areas where a proficient auditor should be safeguarding your business. Use this guide to evaluate whether your current audit service is truly delivering the comprehensive protection and insights your company requires. Ask yourself how much you trust their work. Also ask yourself if they as if they are providing the level of service and expertise your business needs to navigate today’s challenging regulatory landscape.
The 7 ways a reliable and proficient auditor will safeguard your business
It’s evident that an external financial audit is not merely a surveillance exercise based on box-ticking. Rather, it is a proactive partnership between an organisation’s leadership and a thorough and trustworthy auditing firm, to promote business health, continuity and success.
1. Financial integrity and transparency
One of the main purposes of an audit is to review and verify the accuracy of financial records and reports – including revenue recognition, expense reporting and asset valuation – by performing detailed testing of financial transactions and balances. It will also involve examining invoices, bank statements and other supporting documents to check for accuracy and validity. This will ensure compliance with accounting standards (AASB) and provide assurance to stakeholders about the reliability of the financial information being reported
When choosing an auditor, look for one with a proven track record in your industry. A good auditor should be able to explain their approach to ensuring financial integrity and transparency and demonstrate their commitment to staying current with evolving accounting standards.
2. Robust internal control systems
Successful businesses rely on effective internal processes and systems, and an external and unbiased evaluation of these procedures should be one of the key auditing benefits. The reliability of financial reporting arrangements will be reviewed by performing data analysis, comparing system outputs with underlying transactions, and ensuring that access is restricted to authorised personnel only.
Weaknesses in control mechanisms can also be identified, resulting in the recommendation of improvements to prevent fraud and errors. This may involve proposing a segregation of duties and the installation of authorisation procedures, for example by dividing the responsibility for expense authorisation and payment between different employees. A competent auditor should have a systematic approach to evaluating internal control systems. Ask about their methodology for assessing these systems and their experience in recommending improvements that enhance operational efficiency. If your auditor has not previously provided any recommendations for improvements, ask why this is and if they really consider your system of controls to be 100% effective.
3. Fraud prevention
The Association of Certified Fraud Examiners’ survey, Occupational Fraud 2024, reveals that Australia has one of the highest levels of employee fraud in the Asia-Pacific region, second only to China. Of the 183 cases reported, the median loss was $200,000, and while corruption was the most common cause, fraudulent billing, noncash thefts and false expense claims made up the bulk of the remainder. In 2010, a $20 million fraud by a senior employee of Australian electrical retailer Clive Peeters contributed to the company’s collapse.
While it is not an external auditor’s primary objective to discover instances of fraud, a reliable external auditor will uncover material fraudulent schemes through their analysis of unusual patterns and transactions, and conducting interviews to investigate and gather evidence about suspicious activities.
In extreme cases, forensic accounting services may be required, and a thorough auditor will always recommend best practice anti-fraud measures and controls. They should be able to describe their approach to identifying red flags and their process for investigating potential fraud.
4. Regulatory compliance assurance
Business owners, directors and senior management have multiple responsibilities, and staying up-to-date with regulatory changes is becoming increasingly difficult. An experienced auditor will alert a client to any potentially material breaches of laws and regulations, by examining relevant documents and correspondence to ensure that your organisation is adherent and compliant with such areas as tax laws, financial reporting requirements, environmental regulations and labour laws, among many others. This may lead to the avoidance of fines and legal action resulting from compliance failures
You may, for example, need to comply with the Privacy Act (which has been amended 104 times since 1988) or require assistance with addressing your ESG needs and risks, including corporate governance. In addition to this, The Australian Accounting Standards Board (AASB) has recently issued two significant new standards:
- AASB S1: General Requirements for Disclosure of Sustainability-related Financial Information (voluntary)
- AASB S2: Climate-related Disclosures (mandatory for certain entities)
And yet another significant area which may need external auditor assistance is the complexity of balance sheet accounting for leases of items such as business premises, vehicles and office equipment, brought about by the issuance of AASB 16 Leases in 2018 .
5. Proactive risk management
Efficient auditors look to the future just as much as reviewing the past. They are able to identify potential risks which the organisation’s leaders, concentrating on day-to-day business, may miss. You can expect an evaluation of the likelihood of risks associated with fraud, non-compliance, operational disruptions, IT system vulnerability, customer creditworthiness and market fluctuations becoming a reality, and their potential impact. The effectiveness of your existing risk management practices will be assessed, and mitigation strategies recommended.
6. Information security and data reliability
As already mentioned, a comprehensive audit will assess your IT systems and cybersecurity measures, to evaluate the integrity and reliability of your data processing. This will include a review of who has access to the systems, how they access them, and the existing data protection measures. Compliance with IT-related regulations and industry standards will be verified. A careful auditor will also assess your disaster recovery and business continuity plans in case of a system failure or cyber attack, or help you to create an effective policy if you don’t already have one.
7. Operational efficiency
Although this is the last in this list of business auditing benefits, it’s the one that can have the greatest overall impact. It can set your business on a path to success by analysing your operations to improve efficiency and effectiveness. Workflows and processes will be reviewed to identify any bottlenecks, redundancies, waste and inefficiencies. Company practices will be benchmarked against industry standards or best practices to highlight areas for improvement and make recommendations. Internal controls will be assessed to ensure that they support streamlined operations, which will in turn be evaluated to maintain alignment with your organisation’s strategic goals. And, since the management team has a major impact on whether operational objectives can be achieved, an appraisal of their effectiveness will also be included. A reputable auditor should be able to provide case studies of how their recommendations led to tangible improvements in business processes and overall performance for an organisation like yours.
Auditors are your strategic partners in growth and efficiency
Considering the new climate-related regulations, your auditor should be more than just a service provider—they should be a strategic partner.
The seven areas discussed form a crucial checklist for evaluating your current audit relationship. Does your auditor proactively address all these aspects, including new regulations like AASB S1 and S2? Are they equipped to guide you through climate-related financial disclosures?
At Bentleys, our team’s credentials include Australian Government Clean Energy Regulator qualifications and Climate Active Certification. This gives us the expertise to meet all your auditing needs. We’re committed to staying ahead of industry changes, ensuring your business isn’t just compliant, but prepared for the future.
Don’t wait for a crisis to reassess your audit relationship. Ensure your business has a thorough, reliable, and forward-thinking audit partner. Contact Bentleys today to discover how we can safeguard your business and drive its success in this new era of reporting.
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Disclaimer: This information is general in nature and should not be relied on as advice. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs and seek professional advice before making any decisions based on this information.
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