Financial statement audits are helping companies improve their performance, according to a new survey by Deloitte.
The survey, of 300 C-suite executives and 100 audit committee members, found that nearly three-quarters of the top executives and 91 percent of the audit committee members polled said audits of financial statements identify opportunities to improve business performance. In addition, 70 percent of C-suite executives and 79 percent of audit committee members believe that financial statement audits provide valuable business insights.
“We were very happy to see that 91 percent of audit committees looked at an audit as a way to improve business performance, and then for the C suite it was almost three-quarters,” said national managing partner Adam Weissenberg, who leads Clients & Industries for Deloitte’s U.S. Audit practice. “We also had very significant numbers, 79 percent of audit committee members, looking for ways to provide insight. It validated for us that there should be more than just the obligatory audit, and we should be able to provide insight. That's going to be valued by our clients and the people who we're doing the audits for, so that was a very pleasant part of the findings from this.”
Over the past three to five years, companies that capitalize on information they received from audits all or most of the time are 22 percent more likely to achieve growth that the respondents considered to be “good” (with “good” defined as 7 or 8 on a 10-point scale). Those companies are 47 percent more likely to achieve growth that business leaders consider “great” over the past three to five years (with “great” defined as 9 or 10 on a 10-point scale).
However, the survey also found many companies miss out on opportunities to improve business by leveraging insights from audits. One out of every three companies rarely or never leverage the information received from their financial statement audits. Forty-five percent of C-suite executives and 48 percent of audit committee members whose companies don’t always leverage information from their audits don't even have processes in place to leverage the insights they could get from an audit. But 79 percent of the C-suite executives and 94 percent of the audit committee members polled said communicating audit findings in a clear, simple manner would improve their company’s performance.
“At Deloitte we have started putting in place what we call a value wheel,” said Weissenberg. “We're making sure we’re communicating the value and insights that we’ve brought to the company and to the audit committee, just to make sure they understand it, and then they can act on it how they will. One in three companies rarely or never leverage the information being received from their financial statement audits. That's a missed opportunity for us. Let's make sure we're communicating effectively so those are being implemented, or at least thought about and considered.”
He sees ways the survey findings could apply to audit firms in general. “For us as auditors, the other side of this is to say that we need to make sure that we’re communicating to audit committees and management the business insights we're finding, maybe things we’re seeing around industry, around internal controls, in particular for us with all the investments we’ve made in innovation,” said Weissenberg. “You can get a lot of insights out of that. Since we're still looked at as professionals and an independent source and unbiased, it's a good way for us to communicate with management and to make sure we're bringing them more than just the base audit.”
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