The Value of Audit in the Current Economic Environment: Discussion with ACCA’s President

 

The Association of Chartered Certified Accountants (ACCA) is the largest global body for professional accountants and auditors with nearly 404,000 students and 140,000 members in 170 countries. With more than 100 years of experience, ACCA supports its members and students to have a successful accounting and finance carriers through a network of 83 offices, active centers, and more than 8,000 world-leading employers.

ACCA set up its offices in Ho Chi Minh City in 2002 and in Hanoi in 2004, and became the first international career association in Vietnam. ACCA signed a cooperation agreement with the Vietnamese Ministry of Finance in 2003 to offer training courses and provide State-class auditor certificates. The numbers of students and members of ACCA in Vietnam have rapidly increased so far to 4,656 and nearly 400, respectively, from 100 students and 11 members in early 2002.

On the occasion, we have just admitted an additional of 72 new members who are mostly employed in key positions such as CEO, partner, CFO and others in economic groups and multi-national corporations in Vietnam.

The small and medium-sized enterprises (SME) sector makes up the great majority of business enterprises across the world. This sector is just as important as the listed company sector. We should remember that even if a small company has only a handful of shareholders, it will still need to prepare and publish its annual accounts to statutory standards and will still, more often than not, need to satisfy stakeholders such as banks, business angels and the tax authorities about its financial bona fides.

ACCA understands the real issues facing small businesses as 63,000 of our members work in SMEs or small partnerships worldwide. ACCA's theme for 2009-2010 is Accountants for Business. This theme emphasises the important roles accountants play in both the private and public sectors, promoting their role as advocates of sound business practices, champions of sustainable business development and identifiers of value drivers which lead to high-performing organisations.

ACCA supports SMEs to overcome hindrances to develop and create initiatives, new products and services. ACCA focuses on promoting the growth of the SMEs sector in the three main fields: helping SMEs resolve financial difficulties, supplying better financial statements, and improving to the capability of accessing to capital resources.   

There has been a fresh re-examining of the value audit brings to business and society. It is a theme addressed in detail in policy paper recently published by ACCA entitled Restating the Value of Audit. In this paper, we explore possible ways of reshaping the audit to ensure that it remains relevant and responsive to the needs of the various stakeholders involved.

 

The starting point it seems to me is to pose the question “Is Audit Broken?” And the answer to that question is, we believe, ‘no’. The independent audit provides investors with a high level of assurance as to the credibility of the financial statements and of the underlying transactions. In arriving at his opinion, the auditor forms a view on whether the company is a going concern and on the appropriateness of the accounting policies and techniques used by management. In the case of major companies, they act as an on-going source of advice to the non-executives on the audit committee. Without the audit, confidence in the viability of major companies would simply disappear and their cost of capital would rocket.

 

The mission of the accountancy profession in the wake of the crisis must, in our view, be to think constructively about what we can do to ensure that the audit remains relevant and continues to add value to companies and their stakeholders. In particular, it is no longer sufficient to take the view that just because statutory auditors currently perform their role competently and professionally, as the great majority undoubtedly do, the nature of the audit function should necessarily remain as it is. After all, the landscape of corporate reporting is currently seeing some very significant changes.

In the wake of the financial crisis, ACCA has held a series of round table discussions with companies, audit firms, regulatory bodies and investor groups in a number of different countries in order to gauge the global appetite for reforming the audit process.

 

This programme of meetings is still on-going and it is interesting that these meetings have not expressed unanimity about the best way forward. But so far we have been struck by the openness of many of those attending, including representatives of audit firms of all sizes, to the basic idea of reform. This encourages us to argue that the time has come to consider expanding the scope of the audit to encompass an examination of, and the giving of a formal opinion on, a number of specific new areas such as the adequacy of the company’s internal controls and its arrangements for risk management and corporate governance.

 

ACCA believes that external, independent audits, performed properly, can bring benefits to the owners of the body being audited, as well as to its management, creditors and other stakeholders, such as potential investors. Essentially, the audit and other forms of assurance, offer value to businesses of all sizes as an indicator that the company is a viable going concern.

 

And lastly, we champion the value of the skills of auditors in promoting business confidence and seek to develop assurance services that meet the needs of different types of entities.