Audit Interview

[Trellis]

I've heard that it is now a requirement that external financial auditors 'interview' the senior financial person in an organisation prior to audit to verify a raft of regulatory and procedural matters?

Can anyone verify this? I've not seen anything in the financial press or online...

thanks

[AndyAudi]

I'm not aware of any specific changes but that is something Auditors have done for years.

Easyiest way of looking at it is

Auditors are there on behalf of all the companys shareholders to check the Finance Bod's are doing their job correctly and the accounts are in order.

"Interviewing" does sound a bit formal but it is probably a good description.

[Eric Mc]

Yep - nothing new there. Should always be part of the audit process.

[cailean]

I wouldn't use the word "interview". Revised auditing standards came into force in December which increases the amount of more formal documentation on audit files. These will require more discussions between the auditors and management/finance staff. More and more form filling like robots and increased risk of missing errors...

[Trellis]

cailean said:

I wouldn't use the word "interview". Revised auditing standards came into force in December which increases the amount of more formal documentation on audit files. These will require more discussions between the auditors and management/finance staff. More and more form filling like robots and increased risk of missing errors...

Thanks.....this is where I was coming from. I am aware of the increases in documentation in recent years, just not the requirement for formal discussions. I've always had such meetings on an informal basis before and during audits. I couldnt see any revised auditing standards on the web - do you have a link to anything?

[Eric Mc]

The audit packs I used for the past 20 years have always had a section for notes on "Meeting with Client" - usually as part of the planning documemntation.

I don't carry out audits any more (I hate them and none of my clients require them), but even the Accounts Preparation package I still use expects some initial meeting notes to be included in the paperwork.

[cailean]

If you do a search for "Clarified ISAs" you will get stuff - e.g.
http://www.accountancystudents.co.uk/news/read/the...

There is no requirement for a "formal" interview but yes you will need more meetings and discussions with the auditors, but to be frank the Clarifications are mainly just clarifying what auditors should have been doing all the time, they made the Standards clearer. A few do have new requirements, main ones being:
- group audits
- fraud assessments
- use of work of an expert (pension valuations, property valuations, oil & gas reserves etc)
- related parties (increased risk of fraud)
- testing of estimations made by management (will require more discussion between auditor and management to assess judgements made by management)

If you want a pdf of a summary of the changes, feel free to PM me.

[ClassicMercs]

Eric Mc said:

The audit packs I used for the past 20 years have always had a section for notes on "Meeting with Client" - usually as part of the planning documemntation.

I don't carry out audits any more (I hate them and none of my clients require them), but even the Accounts Preparation package I still use expects some initial meeting notes to be included in the paperwork.

Eric has picked the right word here - 'planning'. The idea being if you plan your audit based on the assessed risks you can minimise your work with a view to picking up the 'problems'.
Of course - what if you don't get told what could be a risk area ! Would someone with a problem lurking necessarily lay it on the table for you to mull over.
And again, will the person interviewing have any relevant commercial experience to be able to realise the full implications of matters that may be presented to them.
Luckily most people are honest, but I realise how wet behind the ears I was 20 years ago before I switched sides to join one of our clients.
Like many things - its all back to front. You have money when you are old, but need it when you are young. With age you develop skills and knowledge essential to good auditing - but most auditors are 'trainees' who haven't worked at the sharp end.

[cailean]

True. Auditing standards however now require much more interaction and planning input from the audit partner and discussion with the directors, not just accounting staff. Planning meetings are required with clients' directors and also a planning meeting is required with the audit team/partner. Formal communication is now required from the audit firm/partner to the directors (or audit committee of listed clients) which includes the auditors view on the audit risks and asks the directors to consider whether there are any "missed" risks. Audit partners now need to be much more hands on in the audits, in fact one of our firm's motos is "partner led" and we really do lead the team. It should no longer be like the old days when partners sat in their ivory towers and didn't interact with the lowly audit staff and just lunched with the big boys at the client.

To try and reduce the risk of missing stuff their is a series of reviews. The audit juniors' work is reviewed by the audit seniors while on site and all fieldwork is reviewed by audit managers while on site (questions can then be asked of the client by the seniors/managers). Audit partners review all risk areas, and often most of the file, preferably also on site. For listed or "public interest" audits a technical / independent partner carries out a "hot" review before sign off to ensure that all risks / judgment areas have been covered properly. A tax manager & tax partner review the tax figures....