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Constantly being asked for copies of "audited" accounts and you have to wonder why. They may have had some worth years ago but these days they have no value whatsoever. Just a box ticking exercise for most trying to carry out risk assessments.
The problem is that "audit" has passed into the population's general vocabulary, but without sharing a meaning (a common language) across all the scenarios in which it is used.
In basic terms it means to "conduct an official financial inspection of a company or its accounts" - but according to whose standards and using what methodology is highly variable.
A slightly more useful definition might be "to form a view on whether the information presented in the financial report, taken as a whole, reflects the financial position of the organisation at a given date" - but that still leaves lot of room for 'interpretation' over how the view was formed!
The "15% of fee income" control is meant to act as a deterrent to big companies simply buying the required result from a small auditor - which is no doubt why that's one of the things being checked here - but is not particularly effective if the practice deliberately sets out to provide a 'biddable' service from a smallish pool of large businesses.
You could argue (if in particularly cynical mood) that, if you don't get much from paying through the nose to one of the big 4/5/6, then why not get equally poor service at a lower price!
But the heart of the problem, as per all the recent stories, remains that if you are sufficiently motivated (as undoubtedly Gupta was) then it is tempting to find a biddable auditor - of which there appear to be no shortages.
I'm curious if this Sanjeev Gupta is part of the Gupta family that enjoyed unprecedented benefits from their role in South Africa and alliance with the previous president, Jacob Zuma.
By "audited" you would hope that at least the bank balance has been confirmed and reconciled, but obviously only at a point in time.
Why cant a small firm audit a large one? As large audit firms are frequently shown to be incompetent, so size is no defence from bad audits / accountants.
Ignoring available resources to undertake the audit, the main constraint is the individual audit fee as a percentage of the firm's turnover and their independence if they become very dependent upon just one client.