According to a new report on the future of audit from Big Four firm PwC, 80% of business leaders and 68% of investors thought that audit served the needs of companies.
However, only 41% of the investment community and 68% of businesses thought that audit was effective at meeting investors’ needs.
“The findings suggest that the audit could go further to address the needs of the business community and investors,” said Hemione Hudson, head of audit at PwC.
“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,” Hudson said.
According to the research, 79% businesses and 72% investors were more or less aligned in their view that more information regarding a company’s future prospects and risks should fall within the scope of statutory audit.
Audit could also be used to strengthen the clarity and relevance of corporate reporting.
This could include bringing internal controls within the scope of audit, with 82% of businesses and 64% of investors wanting this to be flexible and tailored to the type of company in question.
Hudson said that restoring trust was not just a question of improving quality alone.
“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,” she added.
The report also found that business (84%) and investors (74%) were largely optimistic about the use technology like AI, automation and data analytics having a positive effect on audit in the future.
However, only 37% of business and 36% of investors thought such technology would help auditors better understand a business.
The report also found there was a consensus on going concern, with the majority of each group feeling that this did not need to be extended past 12 months, however those that disagreed among the business community thought it should be extended to two years, and dissenting investors calling for three years.
Last week, the government announced that it was opening a consultation into the recommendations put forward by the Competition and Markets Authority following its recent review into the effectiveness of the audit market.