1. 34 JUNE 2013
BUSINESS
T
Audit quality –
the role of
management
Jannine Mountford CA, a member on
NZICA’s Corporate Sector Advisory Group,
talks about management’s responsibility
for contributing to audit quality.
By Zowie Murray CA
he International Auditing and Assurance Standards
Board (IAASB) does not attempt to define audit quality
in the Framework for Audit Quality (the Framework).
It acknowledges that different stakeholders are likely
to have different perspectives about the nature of audit
quality. Jannine Mountford CA, Chief Financial Officer
(CFO) at New Zealand Rugby Union (NZRU), believes audit quality
relates to whether the users’ perception of the credibility of the
financial statements has increased as a result of the audit.
The way in which management and auditors interact can have
a particular impact on audit quality. This is consistent with the
measures Mountford uses to determine whether a quality audit has
been performed. “The auditor’s ability to talk through technical and
business issues provides reassurance through information sharing,”
she says.
“My other key measure is keeping to the timeframe when under
pressure to report, without increased audit fees.”
An auditor who has the ability to benchmark against other clients
in similar industries is the most insightful, therefore the success of an
audit can be measured by the quality of those interactions.
However these interactions often need to go beyond management, and
extend to all employees of the audited entity, not just the finance team.
“An audit is not just a statutory requirement, it’s a learning
opportunity,” she says.
It is management’s responsibility to create an environment where
all staff embrace a constructive relationship with the auditors, and
have a high level of integrity.
Mountford, who was formerly Commercial
Manager of Fletcher Building Roof Tile
Group and has held senior finance roles
in various organisations, uses the analogy
of a game of rugby to encourage her
finance team.
“Completing year end is like the end of a
rugby game. Whether the All Blacks have won
or lost, there’s always that high-performance
review at the end of the game of how they’ve
actually done, and that’s how I see auditing.
It’s our own review of our performance, to
promote continuous improvement.”
An essential way in which management
can help produce an efficient audit is
through being prepared. Having all the
audit deliverables ready for the auditor at
the start of the audit will mean management
is not responsible for any delays. Although
management can contribute to audit
efficiency in this way, Mountford says an
efficient audit has to be primarily driven by
the auditor.
“They have to be proactive during the
planning phase and lead that process.”
In terms of effectiveness, it helps to have
good discussions at the initial planning
meeting to set the scene for what’s been
happening in the year. This way the auditor
can get a sense of where the risk areas might
be in order to target their audit work.
However, an open and constructive
relationship between the auditor and
management needs to be distinguished from
one of over-familiarity. It is vital for audit
quality that auditors remain professionally
sceptical and objective by being prepared to
challenge the reliability of the information
they are given. Mountford says they need to
maintain independence.
“It’s a relationship between two parties
both acting in professional capacities and
working towards the same end goal. The
main thing is there is trust on both sides.”
Likewise, management needs to have a
good working relationship with the audit
committee. Mountford believes the “closed-
door” meeting between the auditors and the
audit committee should to be viewed as a
positive one.
“Itgivestheauditcommitteetheopportunity
to ask the questions that perhaps they feel
they can’t ask with management there, which
gives them an extra level of comfort”.

2. 35JUNE 2013
She says the skill set of the audit committee is important,
and this can affect the quality of such interactions. A client who
gets the most out of an audit is one who has an empowered Audit
Committee, which comes from possessing an appropriate combination
of skills.
Management are a key participant in the financial reporting
supply chain. They are responsible for the preparation of the
financial statements and for ensuring they comply with the
applicable financial reporting framework. Management have the
ability to enable audit quality, and the culture within the audited
entity is vital for this to be achieved. In the absence of cooperation
and open dialogue, it is unlikely that a quality audit can be
performed efficiently.
Zowie Murray CA is a Technical Advisor on NZICA’s Technical Services Team.
Audit quality –
multiple perspectives
Audit quality is a multifaceted
concept without a universally
acknowledged definition. Therefore,
in order to obtain an understanding,
it must be approached from a
number of perspectives. This is
why we are producing this series of
articles from opinion leaders which
explore the responsibility of several
different parties for contributing to
and enhancing audit quality.
Previously we have looked at the
roles that the standard setter and
the audit committee perform in
audit quality and next month we
will continue to bring you further
perspectives on this important topic.
...an open and constructive
relationship between the
auditor and management
needs to be distinguished
from one of over-familiarity.
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