Auditing engagement is a critical process in helping UK organisations ensure their financial statements are accurate, reliable, and compliant with regulatory requirements.
It is a professional service delivered by an experienced auditor who is responsible for auditing an organisation’s financial statements. However, not all auditing engagements are created equal and evaluating potential auditors before deciding to hire them is essential.
This blogpost shares ten powerful questions companies must ask before starting an assurance engagement with new auditor.
Table of Content
What is an auditing engagement?
Auditing engagement is when an auditor or auditing firm engages with a business to conduct an independent audit of its financial statements with an intention to express an audit opinion.
It aims to provide an opinion on the fairness and accuracy of the financial information presented by an organisation. During such a process, the auditor assesses internal controls, verifies business transactions and account balances, preparation of financial statements in line with applicable laws and checks the overall financial health.
Furthermore, the audit findings are documented in a report outlining any material misstatements and recommendations for improvement.
You or the auditor can submit the report to shareholders, investors, or regulatory bodies. However, ensure the entire process follows professional auditing standards and regulatory requirements. It ensures transparency and integrity of financial reporting.
However, it is not responsibility of an auditor to detect or prevent frauds.
Why do you need to choose an auditor carefully?
Auditors can be the backbone of your business only when done by the right candidate.
A competent and experienced auditor offers valuable insights into your business operations. They understand the present accounting principles and identify potential financial risks or inefficiencies.
Furthermore, they can identify weaknesses in your internal control systems and offer recommendations for improvement if needed. Thus, auditors can help you strengthen financial management practices and improve overall business performance.
You must always engage an auditor with a strong track record and a good reputation. They help you ensure accuracy and reliability in your financial statements. In addition to that, they adhere to strict professional and ethical standards and protect you from making costly mistakes.
Additionally, auditors from similar industries or sectors can understand unique accounting practices, regulations and complexities. They have industry-specific knowledge and can better understand your business challenges and risks. Thus, offering you accurate insights and advice for better outcomes.
Lastly, trusted auditors play a significant role in building investor and shareholder confidence. Their audit reports assure shareholders, lenders and potential investors that your financial reporting is trustworthy and accurate.
A professional auditor enhances transparency and ensures trust in your business’s financial information. Thus, they improve your business credibility with external parties.
What are the eight questions you must ask before auditing engagement?
You must always ask questions to an auditor before auditing engagement to ensure a successful and efficient process. It helps you clarify objectives, understand scope, timelines and costs. Additionally, you can ensure their alignment with your organisation’s expectations.
Here are eight questions you need to ask an auditor to avoid engagement risk in auditing.
1. How experienced is the audit firm?
Experience is essential in auditing engagements, and you must ask a firm about their experience in your industry. You can inquire about the track record, years of operation, and industries they have served. An experienced auditor better understands business complexities in different sectors and can offer valuable insights.
2. Does a recognised regulatory body accredit them?
UK auditing firms must be registered with a recognised regulatory body like, the Institute of Chartered Accountants in England and Wales (ICAEW) and Association of Chartered Certified Accountants (ACCA). You must check if the firm you choose is accredited by one of these bodies that guarantee your adherence to high professional standards.
3. Timelines
Ask questions about staffing, and team availability. Do they have time and resources to complete the audit within timelines?
4. What is their approach to communication and transparency?
It is essential for any auditing firm to guarantee open and transparent communication to avoid any auditing engagement risk. You must ask the firm about their ways of communication, how often they can provide you with updates, and how they handle potential issues during auditing.
5. Check reviews?
You must ask the firm for references from past clients that give you in-depth insights into their reputation and reliability or check online reviews on websites like Trustpilot. Meet these clients and talk about their personal experiences working with the firm, the work quality they offer, and any difficulties they have encountered with the firm.
6. What is their strategy to manage potential risks?
Auditing engagement comes with potential risks like misstatements and fraud in financial information, and you must notice how the firm handles them. You must ask the firm about its risk assessment procedures, quality control measures, and approaches to identifying and mitigating potential risks.
7. How do they ensure independence and objectivity?
Independence and objectivity are two factors crucial for a reputable audit firm that defines its credibility and integrity. You can ask them how they ensure independence from the audited entity. Additionally, you must also ask for any potential conflicts of interest that might have a negative impact on their objectivity.
8. How up-to-date is their technology infrastructure?
Technology has automated most of the audit tasks and eliminated human errors. Additionally, it has fastened up your work and saves you time, money and other resources. Thus, it makes you worry about how updated is the technology infrastructure of the firm you choose, for example, their software for data analysis or security system.
9. How do they handle emerging issues in auditing?
The auditing sector is constantly evolving, and firms must stay up-to-date with the latest regulations and emerging issues. You must ask them about how they stay updated with these changes. An experienced auditor will navigate any emerging issues efficiently and offer valuable guidance to your company.
There are several other questions that you can ask an auditing firm. It includes a range of services, costs and payment plans, qualification of the team, etc.
Besides these questions, you can ask other questions like:
10. How do you communicate findings and issues discovered during an audit?
Effective communication is key for successful completion of any project. Make sure the auditor can clearly explain their findings, both in terms of strengths and weaknesses, and can provide actionable recommendations. All businesses will have room for improvements and issues, what matters is how auditor will deal with these and suggest pragmatic solutions.
Conclusion
All organisations must conduct thorough research on different audit firms for successful auditing engagement in the UK. When choosing a reliable and competent auditor, you can ask them these eight powerful questions. Make sure these professionals add value to your company and significantly impact your company’s reputation and financial stability.
