Careers in Finance 04/05: Audit & Assurance
What is Audit & Assurance (A&A)?
Audit refers to the process of examining and verifying a company’s financial statements and records to ensure that they are accurate and comply with accounting standards and regulations. An audit is typically conducted by an independent auditor, who reviews financial data, interviews key personnel and performs other procedures to assess the readability of the financial statements. The goal of an audit is to provide assurance to stakeholders that a company’s financial statements are a fair and accurate representation of its financial performance and position.
Assurance on the other hand, refers to a broader set of activities that are designed to provide stakeholders with confidence in various aspects of a company’s operations. This can include everything from financial reporting and internal controls to risk management and sustainability reporting. Assurance engagements can take many forms, including audits, reviews and compilations and may be performed by a range of professionals including accountants and lawyers.
How do Big 4 A&A services work?
The Big 4 accounting firms (Deloitte, PwC, EY and KPMG) offer a comprehensive range of Audit and Assurance services to their clients. These services typically begin with planning, where the auditor assesses the client’s business, risks and controls to determine the scope of the audit. The auditor then conducts fieldwork, which involves testing the client’s financial transactions, verifying account balances and examining other relevant evidence to support the financial statements. After completing fieldwork, the auditor prepares a report that provides an opinion on whether the financial statements are presented fairly in all material respects, in accordance with relevant accounting standards. In addition to audits, the Big 4 firms also offer other assurance services such as reviews and compilations, which provide varying levels of assurance on a company’s financial statements. The Big 4 firms also offer specialised A&A services such as IT audits, internal audits, sustainability audits and other advisory services related to financial reporting and risk management.
How is A&A different from M&A financial due diligence?
Both A&A and M&A due diligence involve reviewing and validating financial information and companies’ financial health. A&A, however, focuses more on ensuring the accuracy and completeness of financial statements. Deals due diligence may consider these aspects, but also looks more broadly at historical financial data, forecasts, and industry projections when assessing financial health. Further in terms of timing, A&A services are mandated to be conducted periodically, usually annually, based on the accounting standards. On the other hand, financial due diligence is only done during an M&A transaction, usually in the negotiation stage. This due diligence work can also take on more of an advisory role beyond validating financial information, looking to identify risks and opportunities in a transaction, based on a client’s financial health.
What does a role in Big 4 A&A entail and what are recruiters looking for?
At the more junior graduate or analyst level of Big 4 A&A, work focuses more on background tasks. For example, ensuring a company’s compliance with the accounting standards and testing their controls and recording procedures. Work shifts with greater seniority. Partners and directors have specific targets for new revenue they need to generate for the firm. Therefore, there is emphasis on interaction and pitching to prospective new clients. Senior A&A firm leaders are still heavily involved in the background audit process, usually stepping in to handle particularly difficult financial statement recording issues.
Therefore, regardless of seniority, auditors need to be highly detail oriented. Due to the meticulous understanding of various countries’ accounting standards necessary in the profession. More senior leaders particularly need to be across changes in the accounting standards, and differences between these standards in different jurisdictions.
Further to being detail oriented, some other soft skills highly valued by recruiters include:
- Time management (particularly as the profession involves strict deadlines for when financial statements need to be finalised)
- Problem solving
- Critical thinking
What entry level opportunities are there in A&A?
A&A Is thus a great career pathway for those who enjoy accounting and analysing financial statements. Graduate and internship opportunities are available each year at the Big 4. While mid-tier firms such as Grant Thornton and BDO also offer similar entry level opportunities that can work as eventual pathways into the Big 4.
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