WELCOME back to the second write-up in the series. Last week we looked at the benefits of audits to SME’s.
We continue this week by focusing on the role of audit in listed and non-listed entities.
The role of audit in the context of our capital markets is well understood. In the mid-1990s Sir Arthur Levitt, then chairman of the US Securities and Exchange Commission, brought importance of the role of independent audit to the attention of the world’s capital markets. In 2010 Jeff Lucy, chairman of the Australian Financial Reporting Council, emphasised the same sentiment: “A robust financial reporting and auditing framework plays a critical role in well-functioning capital markets. An independent and quality audit provides a necessary external check on the integrity of financial statements. Transparent and credible financial reporting together with an effective audit function underpins confidence in our financial system and is essential for sound economic growth.”
There is minimal opposition concerning the value of audit to our capital markets. It is an established fundamental necessity to ensure high quality financial information is delivered to all capital market participants.
The value of audit to non-listed entities is less well understood. In recent times audit has been labelled as a “compliance cost” which is not needed in the private arena. While upholding capital markets as the primary target market for audit, regulators have started to think of audit as an onerous obligation in other market segments.
The audit function has a long history in the western world and has contributed to the efficient development of established economies. The emerging view that audits are only concerned with public accountability raises significant concerns for public policy to promote well-managed economic growth.
It is our view that independent audits provide far more than “public accountability” and have a key role in promoting good business practices throughout the economy. Further, the role of audit is critical to guiding good governance in smaller companies before they become economically significant, thereby reducing the risk of business failure.
ABOUT BAKER TILLY INTERNATIONAL
Baker Tilly International is the world’s 8th largest accountancy and business advisory network by combined fee income of its independent members. It is represented by 126 independent firms in 147 countries with combined fee income of US$3.8 billion and 28,000 people worldwide. Its members are high quality, independent accountancy and business advisory firms, all of whom are committed to providing the best possible service to their clients, both in their own marketplace and across the world. Our key services include Auditing, Advisory, Tax and Accounting.
Baker Tilly is the representative member firm of Baker Tilly International in Zambia
For more information, visit us at 8, 13 Reedbuck Road
Telephone. +260 211 269 416 +260 967 207 506
Practice Director: Priscilla S. Mpundu