A survey of 1,000 people in Singapore by ACCA (the Association of Chartered Certified Accountants) has revealed their expectation that auditors should evolve to prevent company failures. The survey combined two types of questions: those that test knowledge about the nature of an audit and those that ask about expectations relating to an audit.
The role of an auditor essentially is giving an opinion on whether the financial statements give a true and fair view of the financial position and performance of the company. Overall, it appears from the survey, that the knowledge of what auditors do is generally poor. When asked to define the role of an auditor, only 31 percent of respondents from Singapore were able to do so.
While avoiding company failure is primarily the responsibility of a company’s management, the reality is audit may identify some conditions that could lead to a company’s failure in the future. This may explain why about half of those questioned believe auditors are responsible for avoiding company failures – the highest of all 11 countries featured in the survey. The report notes that there will always be risks to a company that the audit does not currently address, such as the sustainability of the company’s business model.
The survey was conducted in association with Chartered Accountants Australia and New Zealand (CAANZ). ACCA believes it highlights a legitimate concern, pinpointing the expectation gap as the most pertinent issue facing the profession.
The gap should be assessed in three components: the knowledge gap, the performance gap and the evolution gap. The report proposes addressing each of these separately.
Maggie McGhee, executive director – governance at ACCA, said: “ACCA’s survey highlights challenges for the accountancy profession, regulators and government in how to respond to public expectations of audit.
“The profession has long spoken about the expectation gap in audit, and our research highlights the failure of the gap to close. Globally, it is clear that further education on the auditor’s role is required, backed by a proactive approach from the profession to address public concern.”
Reuter Chua, country head, ACCA Singapore observes, “Our research shows the urgent need for an open dialogue involving the profession, stakeholders and the public to understand what kind of audit future the public expects.
“The data shows high levels of misconception, and that the public are telling us they see audit is part of the solution, a robust audit sector exercising the appropriate levels of professional scepticism. We must work together to address their legitimate concerns about audit.”