While audit quality may not be your top priority, you may want to reassess and reallocate resources towards your business’ ability to improve and maintain audit quality. Now, we understand if you’re a little hesitant to do this as you may not know much about what audit quality is. This is why we thought it would be useful to put together a brief discussion on this topic. If this is something that you want to learn more about, read on as we go through everything you need to know about audit quality.
What Is Audit Quality?
Audit quality encompasses the key characteristics that create an environment where audit data is likely to be accurate and reliable. Audits are considered to be high quality when the following conditions are met:
- Exhibited appropriate values, ethics, and attitudes.
- Applied a thorough audit process that complied with regulations and standards.
- Provided accurate and timely reports.
- Interact appropriately with any and all relevant stakeholders.
Financial statements must be reviewed in a consistent and thorough manner by qualified auditors, but that process is only effective when the auditors have support from the company’s management and all other relevant parties.
Why Is Audit Quality Important?
Financial reports provide investors with the information they need to make confident business decisions. The goal of an audit is to ensure that these reports are credible and accurate. Improving the quality of audits and ensuring consistency in audit procedures is key to maintaining investors’ confidence in the audits’ conclusions.
If a company fails but its financial report did not properly account for its lack of viability and issues that lead to its collapse, its directors and the auditor will be brought into question. In the case that investment decisions are based on financial reports that do not reflect the true financial position and performance of a company, this is a clear red flag.
How Do You Improve Audit Quality?
Given how important audit quality is, you may be wondering how to improve your business’ overall audit quality. Here are a couple of things that you can do:
- Conduct effective quality reviews of your audits regularly.
- Identify root causes of findings and develop action plans to address these findings.
- Review staff structure to ensure that they are well equipped to handle complex audits.
While this may seem like it requires a lot of time, manpower, and resources, improving the quality of your audits will prove to be beneficial for your business. Think of this as an investment that will help your business.
We hope this article proves to be useful when it comes to furthering your understanding of audit quality. While new concepts may be rather intimidating, this article should be enough to help you get started. Be sure to keep the information that we’ve discussed in mind so you can make the best possible decisions for your business. With that being said, take note that we’ve merely covered the basics in this article. For more information on audit quality, we suggest reaching out to a professional.
If you’re looking for an accountant in Caloundra to help you with your business’s finances, SMB Accounting is here to help. We offer various accounting services, such as individual tax returns, small business accounting, SMSF audits, trust account audits, special financial statements, and more. Learn more about how our accountants can help your business today!