Points of view
Accurate and reliable financial statements are essential to the effective functioning of the capital markets. To that end, auditors play an important role by executing independent and objective audits of the financial statements that are prepared by management.
The Global Financial Crisis (GFC) however has triggered a fundamental review of the role of audit. Changes to reporting requirements have been one of the ways audit responded to the GFC, and we’ve seen the audit function grow more complex, with increased regulatory and reporting compliance requirements.
These changes will shape how auditors deal with investors, companies, regulators, Audit Committees (ACs), as well as their role in capital markets.
We aim to play a constructive role in the debates that will shape the future of auditing, financial reporting, regulation and corporate governance.
Here, we share our thoughts on several key topics:
- Trust
- Release of Audited financial statements
- Role of audit
- Roles of Boards & the finance function
Trust
Trust should be a key component of boards' and shareholders' agendas as we move into a more volatile and challenging era because while it is hard to measure, trust is a critical asset in ensuring an organisation's long-term survival and success.
The aftermath of the recent financial crisis has shown both the vital importance of trust and the severe consequences to economic prosperity when it is undermined by perceived untrustworthy behaviour.
In tackling the issue of trust, there is no single one-size-fits-all solution. Each organisation will face its own set of challenges that affect its strategy and vision. These are some key points to note:
- Trust has to be understood and embedded in the organisation's culture in a natural way.
- Organisations need to see themselves in the context of a broader network of which they are a part, with society, government, regulators and individual stakeholders all involved, dependent and impacted by their actions.
- Building trust requires patience and discipline and must be continously earned and reinforced through the right behaviours. So, creating a new type of corporation that reflects the ethic of care more fully in its behaviours, thinking and decisions, may be necessary.
- Creating and embedding the right culture within organisations will require the right leadership. People will only do the right thing consistently and reliably if they are in a wider culture that celebrates and rewards it, and this needs to be set from the top, by the leaders.
- Cultural and behavioural change must extend beyond compliance with a code of conduct. Organisations need to rethink their entire approach to risk and compliance, and seek to cultivate behaviours that are based on not following rules, but living by principles.
- Organisations also need to rethink their communication and reporting strategies because trust and transparency are becoming increasingly important to corporate reputation. What customers, suppliers, investors and society at large think, matters when it comes to building trust.
- Finally, organisations cannot regulate their way to trust. It has to be earned through voluntary behaviour based on sound principles of honesty and integrity.
We can help organisations build and maintain trust with different stakeholders by providing audits on which markets can build trust in organisations’ finances and processes. We can also provide assurance for information on non-financial assets.
Learn about our Trust initiatives.
