Only 41% of investors feel like company audits meet their needs, according to a report by PwC.
The new report titled ‘The Future of Audit: Perspectives on how the audit could evolve’ – gathered insights and opinions of a wide range of individuals and organisations who have a stake in the effectiveness of audit, such as academics, investors, audit committee chairs, CFOs and politicians.
The firm said it has gathered hundreds of points of view over the past eight months through roundtable events, meetings with senior business leaders, investors and other interested parties, an online forum, and a survey of business leaders and investors to capture their ideas about the future of audit.
PwC said the key findings from the investor and business leader survey included:
- Both the investment community (68%) and business leaders (80%) think today’s statutory audit serves the needs of companies, while 41% of the investment community and 68% of the businesses surveyed feel that the audit meets the needs of investors.
- Some 32% of investors and 52% of businesses believe audit is effective at meeting the needs of wider stakeholders, such as employees, customers and suppliers.
- There is a broad consensus on the desire for more insight and clarity in the audit on the future risks a company faces. Some 72% of investors and 79% businesses are in favour of more information about a company’s future prospects and risks in the central scope of a statutory audit.
- 76% of investors and 84% of business leaders believe the use of technology such as AI, automation, data analytics would increase the efficiency with which the audit is performed. While there is a consensus that technology will increase the level of scrutiny and overall quality of audits, only 37% of businesses and 36% of investors think technology will enable auditors to better understand a business.
- There is also broad backing for strengthening the quality of reporting by bringing a company’s internal controls within the scope of the audit and strong appetite amongst investors (64%) and businesses (82%) – large and small, listed and family-owned – for the scope of the audit to be flexible and tailored to the type of company being audited.
Hemione Hudson, head of audit at PwC UK, said: “We aimed to broaden the debate and have listened to a wide range of voices engaged with corporate reporting. The findings suggest that the audit could go further to address the needs of the business community and investors.
“This underlines the need for the audit to evolve to meet the expectations of stakeholders, and to help rebuild trust in businesses and the capital markets. Auditing has made a significant contribution to the UK’s economic health over many decades and we want it to continue to contribute to driving growth, trade and prosperity.”
She added: “At PwC, we are working hard to ensure that the quality of our own audits continues to improve, and have put in place a substantial programme of measures to support this. But it is clear that improving quality alone will not restore trust in the audit. The audit needs to evolve and a more fundamental review of the entire corporate reporting system is required to ensure stakeholders can have confidence in the information they need for decision making.”