Auditors will need to demonstrate greater value in their communications to the board, shareholders and the general public according to the report, “Enhancing the Value of Audit – Board Directors’ Perspective,” by Singapore Institute of Directors (SID) and the Association of Chartered Certified Accountants (ACCA).
In particular, what is wanted are “more subjective statements from the auditors” such as assessments of the overall control environment and the “tone at the top.”
Further, to prevent information being open to misinterpretation, general investors will need to be educated.
Wilson Woo, President of ACCA Singapore branch said, “It is very important for the lines of communication between external auditors and the board be kept open and transparent. Both parties need to work closely together to ensure that information that is communicated to stakeholders is fully understood. Where there are areas for improvements, these should not be viewed as negative or alarming but seen as necessary recommendations to take in order to improve business practices and productivity.”
Other highlights in the report are the falling audit fees, which directors felt could prevent auditors from allotting sufficient time to fully comprehend the audit issues.
Further, the mandatory rotation of auditors, which has been discussed in the US and the European Commissioner (EC) to reinforce auditors’ independence, would be cost-prohibitive and probably ineffective for Singapore.
Last but not least, some directors expressed concerns that recommendation from the European Commissioner (EC) to transform bigger audit firms into pure audit outfits could be undesirable as such narrowly-focused firms may lack the skill sets needed to address today businesses’ complexities.
John Lim, President, SID said, “Given their many areas of expertise, there is much more that auditors can contribute to stakeholders. One such area is in communicating to them other useful information that the auditors have acquired during the course of the statutory audit.”