There has been a positive change in audit market environment. Audit has gone through numerous changes due to major transformation in the regulatory, social and technological areas. The purpose of audit is to ensure transparency in business and to provide reliable financial information that investors and creditors can rely on.
Audit’s challenge is to give fair, objective and reasonable opinion about the company financial reports.
Challenges In Auditing Firms:
1. Lack Of Communication Undermines Your Work.
If the organization you are auditing doesn’t understand the scope and purpose of your audit program, you risk creating an environment in which the people you’re interviewing become less helpful and more tight-lipped with their answers — even to the point of being hostile.
2. An Overload Of Work For The Teams.
To run the organization smoothly, auditors should have sufficient time to start and finish the audit jobs on time and keeping the clients satisfied. But more often than not, they face impossible workloads and unrealistic deadlines. This results in possible coercion or rush to conclude the work. This not only erodes the jobs quality but also poses a risk to auditors.
3. Silence About Frauds.
Auditors are expected to detect fraud and corruption to prevent businesses from suffering the effects of unscrupulous activity. But they cannot always recognize wrongdoing, especially if the perpetrators make no mistake in keeping the audit trail and in presenting the required documents.
4. Audit Judgment Does Not Always Match Business Judgment.
Auditing is a professional assurance service based on standards of integrity, objectivity and impartiality. However, the view on the value and reliability of a business does not always match that of the auditors. Auditors also acknowledge that the trend from financial statement audits towards performance and control types of audits has made it even more critical for audit engagement teams to think more creatively and holistically.
5. Too Much Focus On Rules And Regulations.
The auditing profession has created a complex system of rules and regulations, which are used in order to ensure the integrity of the data being reported into financial statements. However, the system may have become too complicated, especially in this post-Enron world. The auditors are often expected to act as the rules’ police, and sometimes this way of moving ahead in the work is not very helpful.
One of the challenges in auditing firms is needing a charity audit to ensure compliance with regulations and maintain transparency in financial reporting.
6. The Focus On Internal Controls.
Auditors have historically placed a high degree of emphasis on the internal control systems of the organization they are auditing, with the view that they are the main responsibility of the organization to adequately safeguard their assets.
7. Insufficient Independence.
To be truly objective and impartial in their work, auditors need to preserve complete independence from the organization being audited. However, this becomes complicated when the auditor also operates as a consulting group, so the companies that are audited can use the consulting side of the business to secure the audit.
8. Too Much Time Spent On Preparing For The Audit.
Auditors spend a lot of time preparing for the actual audit; they should spend more time actually conducting the audit, examining asset values and reviewing the process. Auditors spend a lot of time searching for adequate records to verify and authenticate assets.
9. The Formulaic Approach To Audit.
Sometimes the audit industry can be very formulaic, so auditors may feel like they are just blindly following the rules as opposed to giving a truly well-rounded audit and being critical in their activities.
10. Lack Of Desire To Excel In Their Work.
Some auditors may not have an intense desire to excel in their work; they may feel like all they need to do is just follow the rules and not get close to the organization being audited.
Also, auditing firms are exposed to financial and accounting frauds due to some loopholes in the rules. To get rid of such a frauds, auditing firms need to build very strong risk management systems with a host of checks and balances.
Despite all these challenges, auditing firms are the ultimate solution to the above-mentioned problems. Auditing firms can’t avoid frauds. We need to identify frauds as early as we can. Strong risk management systems mean better adherence with the highest auditing standards, which are of strong service to the fiscal community.