During August, Brendon and I I had the opportunity to spend some time in Au with our existing and potential clients in the United Kingdom., While we were impressed by the variety of local beers and left longing for a decent South African coffee, we picked up some common themes in our discussions. Viewing a lot of these discussions with a South African lens is always interesting as some topics we feel South Africa is far ahead and in others we may just be scraping the surface compared to the UK.
One topic that came up repeatedly, although from a lot of different angles was, the changing environment within the UK regulator. Specifically, with the draft audit reform and corporate governance bill that was submitted this year. The main points include:
- The creation of the Audit Reporting and Governance Authority, replacing the financial reporting Council.
- The requirements surrounding public interest entities and their audit requirements
- The overseeing of the audit market by the regulator.
Although nothing is set in stone as of yet as there is still a bit of work to be finalised by the regulatory board, what we are seeing is there is a definite pre-emption of these regulatory updates. Many firms are now focusing on quality throughout their audit process, this includes the adaption of audit methodology, the scoping of audit risk areas, the level of documentation required throughout the audit file and the sufficient planning of staff on audit engagements.
As one reflects on the South African Independent Regulatory Board for Auditors (IRBA) recent findings, they have focused on addressing several critical issues in the auditing profession. Key findings from their inspections revealed an increase in the number of audit deficiencies, particularly related to the quality of audit engagements and risk management procedures. These findings led to a call for more robust audit planning, Improved documentation, increased supervision, as well as the implementation of advanced technology in audit processes.
As we engaged in discussions with UK clients, it was clear that firms are anticipating the changes that the Audit, Reporting and Governance Authority (ARGA) will bring. There’s a sense of urgency as companies adapt their internal processes to meet the future expectations of ARGA, especially within the public interest entities that are now facing heightened scrutiny. The emphasis on quality is not just about compliance but includes the establishment of a framework that reduces the pressures from the regulatory board. Firms are pre-emptively revisiting their audit methodologies to ensure that risk areas are thoroughly scoped, and that documentation throughout the audit file is not just sufficient, but comprehensive enough to withstand regulatory reviews.
Interestingly, while the UK is about to undergo this regulatory evolution, South Africa has been addressing similar concerns through IRBA findings the last couple of years already. The IRBA has put considerable focus on improving audit quality and has introduced reforms to strengthen oversight in the industry. It does feel that the South Africa’s audit sector appears to be further along in terms of the evolution and embedding new quality control mechanisms into day-to-day practices.
Looking ahead, the quality of audits across all jurisdictions will face increased scrutiny. This makes collaboration with colleagues who have already adapted their audit approaches a valuable opportunity to learn and enhance practices moving forward.
Links:
https://www.bizcommunity.com/Article/196/511/187572.html
