Balancing independence and efficiency in audit can be a difficult task.
The better your auditor knows your organisation, the easier the process can be – but in some cases, that comes at the cost of objectivity and challenge.
Some people would say the best approach is to change your auditor on a regular basis, avoiding any over-familiarity by starting from scratch each time.
We don’t think that’s the case, however. If you already have a good auditor with a solid understanding of your organisation, the benefits of sticking with them often outweigh any advantages of switching.
In general, we advise our clients to think about whether they’re happy with their current auditor’s service and establish why they might want to change, rather than automatically rotating every few years.
Are you required to change your auditor?
Only the largest businesses in the UK are required to change auditors on a regular basis.
Under regulations implemented in 2016, all public interest entities must tender for a new auditor every 10 years, and rotate their auditor after a maximum period of 20 years.
For most smaller organisations, there’s no such requirement. Instead, audit firms themselves must ensure objectivity in line with the Auditing Practices Board’s ethical standards. This is done by assessing threats and putting safeguards in place where staff have a long association with the audit.
That means as long as your auditor is compliant with those rules, they should already be monitoring and minimising the risk of bias in the audit.
Changing auditors: the pros and cons
There are three main reasons you might decide to regularly rotate your auditor: ensuring their independence, getting a new perspective, and keeping fees competitive.
Many people worry that the longer they work with an auditor, the higher the independence risk – in other words, a close relationship could make it harder for the auditor to remain objective.
There’s also the concern that it could create complacency, leading to inefficiency as you follow the same processes without stopping to think about how they could be improved.
Bringing someone new in means you’re getting a new perspective and fresh ideas on how things could work in your organisation, while at the same time getting the opportunity to find more competitive fees.
The problem is that frequently changing your auditor can be disruptive, not just for you but for your organisation as a whole.
First, there’s the time you’ll need to set aside for you and other stakeholders to think about your requirements, prepare a tendering process and assess your options.
Then, once you’ve chosen a new auditor, your team will need to work on getting them up to speed, explaining processes and sharing information they’ve probably had to go through in the last audit.
And each time you change to a different auditor, you’re taking on the risk that their service could fall below the standard you’re looking for, that they might not have enough sector-specific knowledge, or that the relationship won’t work as well – that you just won’t click.
So the question is, do the benefits of a new auditor make all the teething problems worth it?
We think that as long as your current auditor’s service is up to scratch, the answer is no.
A good auditor will be able to build up an understanding of your organisation that makes the audit process run smoothly, but they’ll also be able to maintain their objectivity and challenge you when it’s needed.
They won’t just go through the motions or do things the way they’ve always been done. Instead, they’ll look for new ways to improve their own service, as well as giving practical feedback on your organisation’s systems and processes.
In this case, the long-term relationship you build with an auditor can be an advantage rather than a risk, making the audit faster, less stressful on your team, and more valuable to your organisation.
When to change your auditor
That said, there are times when it’s better to look for a new auditor. The important thing is to establish your reasons for changing, and to agree within your organisation that you’re ready to look elsewhere.
There could be many reasons for this, but some of the most common ones include:
- You’re unhappy with the service or the audit quality
- Your fees have increased and you no longer feel you’re getting enough value to justify them
- You don’t feel your auditor is able to be objective
- They don’t have enough specialist knowledge of your sector
- Your relationship with them is poor or has broken down over time.
If you can see no way to resolve those issues with your current auditor, looking for an alternative might be your best way forward.
We provide specialist audit and independent examination services for SMEs, charities, non-profits and the medical sector.