Understanding the Audit Process
At Basford Consulting, we assist lawyers in matters involving alleged accounting and auditing failures. Our FAQ, Frequently Asked Questions, are designed to assist lawyers understand the key aspects of an audit that give rise to litigation and dispute upon which we regularly provide expert evidence.
An auditor is required to design and perform audit procedures to issue an audit opinion on whether or not an entity's financial statements comply with Australian Accounting Standards (AASBs) as issued by the Australian Accounting Standards Board.
The audit is governed by Australian Auditing Standards (ASAs), which are in line with International Auditing Standards (ISAs). Whilst the assurance given by an auditor is not absolute, it is a significant "tick of approval" for users of those financial statements, particularly in respect of impairment and going concern.
From our experience, the application of auditing standards should be straight forward. However, in many of the disputes upon which we have been asked to opine upon, the auditor has failed to obtain sufficient audit evidence, relying upon representations received from the client. As a consequence, the auditor gave an unqualified audit opinion, on financial statements that were not prepared in accordance AASBs.
We have over 60 years of combined experience, understand the audit process and the requirements and application of the ASAs, these FAQs should allow lawyers to quickly focus in on the key requirements a reasonably competent auditor is required to comply with to determine whether there is a case to litigate or defend.