Questions a Board Member should ask an auditor

14/07/2018 2:07 PM

`A good auditor helps us ask the right questions.` *

This simple, yet powerful comment rings true of the type of relationship an organisation should have with not only their internal audit department or audit committee, but with their external auditors.

Although the interaction between the auditors and the Board may be limited, it is important that both parties are involved in the audit process in order to achieve a positive and value-adding outcome. Below are four typical questions which a Board should ask the auditor.

What is the most important step we could take to further protect our organisation against fraud and improve our internal controls / processes?

The Board is responsible for ensuring that there are sufficient and adequate internal controls and processes in place. It is important for the Board to obtain feedback on the processes and controls currently in place and to obtain suggestions as to how they can be further improved as a benefit to the business. The auditor, being an independent judge of the business, is in a perfect position to provide honest and constructive feedback.

Are you getting the appropriate cooperation from management and staff?

Auditors must be in contact with management and other staff members as a means of gaining information to complete the audit process. If sufficient cooperation is not being provided to the auditors then this may be an indication that there are other issues which perhaps need to be investigated. Reluctance to cooperate could be an indication of potential fraud and/or error.

Where staff and/or management do not cooperate with the auditors, this creates a conflict between the Board’s desire for an audit to be undertaken effectively and efficiently, and the auditor’s ability to do so. Obtaining feedback on staff performance is essential when attempting to improve the audit process for a business, as improvements will assist the audit process and reduce inefficiencies and potential fee overruns.

Was adequate documentation available to support transactions and balances?

The auditor needs to obtain sufficient and appropriate audit evidence to support their testing of transactions and balances, and the substantiation that a company’s financial performance and position are true and fair.

Substantiation can only be achieved through assessing documentation such as invoices, receipts and contracts. Where evidence for balances and transactions cannot be provided, an auditor cannot gain comfort, which is a limitation of scope on the audit. This could result in a qualification of the audit report.

What are the recent amendments to Accounting Standards and the impact on the financial statements?

As the Board is not often involved in the daily operations of the business, the members of the Board should be encouraged to ask questions regarding the preparation of the financial statements. Auditors will be able to detail the recent amendments to the Accounting Standards and the impact on the entity’s financial report. The auditors should be up-to-date with the latest information and should be able to provide you with the correct technical and accounting advice.

For further information, please contact Moore Stephens on or phone (03) 9614 4444

* Jan Michiel Hessels (former CEO of Vendex KBB and Deli Universal).

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