- New financial reporting and accounting matters
- Business advice, including changes in taxation and governmental regulation
- Personnel evaluations
- Progress reports and significant matters noted during the conduct of the audit
It is fundamental to an audit that the auditors have access to all relevant informa-
tion underlying the company’s financial statements. Beyond this, it is very important
that the company communicate their expectations in all areas discussed in this sec-
tion clearly and succinctly to their auditors if they expect their expectations to be
fully satisfied.
(iii) Form. At the heart of communications between a company and its auditors are
written reports or presentations. The value of written communications in avoiding
miscommunications cannot be overestimated. Even in meetings that feature oral pre-
sentations and discussion, written communications often form the underlying basis
for the meeting.
The combination of significant distances and differences in time zones has long
been recognized as a challenge to effective communications in international companies
and among the auditors serving those companies. To overcome this hurdle, financial
management from the parent company together with the engagement partner and man-
agers for the parent company have visited major subsidiaries and led meetings with the
subsidiaries’ financial and operating management and engagement partners and man-
agers serving the subsidiary. This form of communication can be characterized by
viewing the parent company financial management and engagement partners/managers
as the hub of a wheel and the visits to the subsidiaries as spokes on the wheel.
More recently, many international companies and their auditors have conducted
meetings on a worldwide or regional basis that bring both financial management and
auditors from all subsidiaries together with the financial management and auditors
from the parent company level. While such meetings entail the commitment of time
and economic resources, the advantages to be gained are numerous.
From the company’s perspective, the opportunity to:
- Describe their business vision and discuss their specific needs
- Address the priority issues, opportunities, and threats to be faced both in the
short term and in the long term - Discuss the related actions planned or underway
- Outline the methods used to measure success
- Relate what is expected from their auditors
From the auditor’s perspective, the opportunity to:- Gain insights into the company’s needs
- Express their perspective on controls over the financial reporting process
- Secure feedback on the company’s expectations
- Improve communications with the company’s decision makers
- Promote the exchange of ideas and experiences
- Subdue time and space barriers
31.2 ESTABLISHING EXPECTATIONS 31 • 9