The secrets of effective auditing

BRYN LUFFMAN, from Page Kirk's audit team, looks at the qualities and characteristics that set effective audit firms apart.

It is a legal requirement for all companies listed on the London Stock Exchange to be audited every year. In addition, private companies also need to be audited if they meet at least two of the following criteria:

• They have an annual turnover of more than £10.2 million
• They own assets worth more than £5.1 million
• They have more than 50 employees

Many private companies choose to be audited anyway, even if these qualifications aren't met. This is often because they want to identify areas they can improve as a business. In recent times, we have read of audit scandals, with KPMG being fined £2.1 million in 2018 for the misconduct of Ted Baker's financial statements and PWC being fined £4.55 million for mistakes in their Redcentric audit. Looking these up, I couldn't help but wonder: what should clients be expecting from an auditor and how do you identify a good firm?

I believe auditors should thrive in the following areas:

• Communication: - Auditors should be able point out to clients about what is going well within the organisation. They should then add to this by offering suggestions of how to manage areas which need improvement. A strong way in which auditors should communicate is to ask open-ended questions to get a better picture as to what's going on.
• Interpersonal Skills: - Having all the technical skills in audit is extremely important, but it will only get you so far. You need to be able to deal with all types of clients and situations to ensure the audit runs as smoothly as it possibly can. In financial services, there is an emphasis on the “80/20” rule, which is the ratio dedicated to listening versus talking. This can allow you to understand and act effectively – whatever the scenario may be.
• Know your law: - Clients are expecting you to provide them with truthful information, meaning auditors must know the law. You certainly do not want to be making up rules on the spot under pressure. This will have a knock-on effect throughout your client's organisation, and is how firms end up getting into scandals.
• Experience: - It can be extremely tricky for someone to go into a top audit role and perform well, even with the relevant qualifications. I believe it is important that auditors start with smaller tasks and then progress as time goes on. This is really key as the inexperienced can learn what to expect from audits with minimal pressure on them.
• Tenacious: - One thing that is necessary for auditors is to obtain information from the client. However, from personal experience, this can often be tricky with the client not understanding or not wanting to cooperate too much. However, it is important to keep trying. It often takes a few goes or the key question to get the response you are looking for.

With rules changing and technology advancing, the way we audit will continue to change, on both a large and small scale. I believe, however, these five qualities will always be necessary to carry out a successful audit.

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