Despite the valuable perspective that a financial statement audit provides, one out of three companies fails to fully use the information, according to a recent survey and report from Deloitte.
The report, Audit Evolved, is based on survey responses from 300 executives in the C-suite and 100 audit committee members.
“Powered by technology and innovation, the audit has evolved into a strategic opportunity that can help guide and inform future business decisions,” Joe Ucuzoglu, chairman and CEO of Deloitte & Touche LLP and leader of Deloitte’s US audit practice, said in a prepared statement.
The survey reveals that the audit has the power to provide insights, identify inefficiencies or risks, and help inform companies’ best practices, Ucuzoglu said.
Still, auditors and their clients are missing out on what financial statement audits can accomplish in more depth. Almost half (45 percent) of C-suite executives and 48 percent of audit committee members don’t have processes in place to make better use of audit findings.
“Audits that deliver sharp, tailored insights and illuminate industry trends can give boards and executives information they can use to help improve operations and performance,” said Adam Weissenberg, national managing partner of audit clients and industries for Deloitte & Touche.
What’s more, increased transparency of financial statement audits would improve company performance, according to 79 percent of C-suite executives and 94 percent of audit committee members surveyed. And about the same percentage say that financial statement audits reveal what their companies could do different or better.
Besides that, 46 percent of executives and 62 percent of audit committee members who reviewed audits with information about market and industry insights, inefficiencies, or risks say they would probably have missed that feedback if it hadn’t been in the audit.
But leveraging that information is the key. And that’s where data analytics enters the picture, the report states.
The report cites an unidentified large hospital where auditors used data visualizations to evaluate the balance of property, equipment, and plant – including location, asset, and transaction levels. The auditors were able to give hospital executives specific risk assessments and insight into depreciation and in-service data analyses.
Companies that leverage such information almost always indicate stronger growth. According to the report, companies were 22 percent more likely to show growth that their leaders consider “good” and 47 percent were more likely to show “great” growth during the past three to five years.
But executives want to take the information processing of audits even further, the report states. They want audits to provide a wider range of strategic and operational insights that go beyond financial reporting. At the top of the list: information about spending patterns, assessment of how effective the company’s business processes are, and recommendations for improving operations.
About Terry Sheridan
Terry Sheridan is an award-winning journalist who has covered real estate, mortgage finance, health care, insurance, personal finance, and accounting and taxation issues for newspapers, magazines, and websites. A Chicago native and former South Florida resident, she now lives in New England.