Companies that capitalize on audit findings more likely to generate higher levels of growth
Financial statement audits, essential to helping the capital markets function effectively and with confidence, are helping today’s business leaders improve the performance and operational processes of their companies, according to a new Deloitte survey. Almost three-quarters of C-suite executives and 91 percent of audit committee members who responded agree: Audits of financial statements identify opportunities to improve business performance.
Moreover, the majority of business leaders surveyed agree that financial statement audits provide valuable business insights; 70 percent among C-suite executives and 79 percent of audit committee members. And they place a premium on audits that provide insights, too, according to the survey.
“Powered by technology and innovation, the audit has evolved into a strategic opportunity that can help guide and inform future business decisions,” said Joe Ucuzoglu, chairman and CEO of Deloitte & Touche LLP and leader of Deloitte’s U.S. audit practice. “We continue to take great pride in the auditor’s foundational role of enhancing trust and confidence in the capital markets. This survey indicates that board members and executives also recognize the power of the audit to provide insights, identify inefficiencies or risks, and help inform companies’ best practices.”
Eighty percent of C-suite executives and 93 percent of audit committee members agree that a financial statement audit delivers a valuable outside perspective. Further, approximately one-half of the business leaders whose audits delivered information about market or industry insights, inefficiencies or risks report that they would have likely missed this information if not for the audit.
A missed opportunity for business?
Despite overall awareness of the value that today’s audits deliver, many companies still miss out on the opportunity an audit provides to improve their business. According to the survey, 1-in-3 companies rarely or never leverage the information received from their financial statement audits.
Conversely, surveyed business leaders of companies that capitalize on information received from the audit all or most of the time indicate stronger growth than those that do so rarely or never. While there are many factors that contribute to growth, the survey results show that over the last 3-5 years, these companies are 22 percent more likely to achieve growth that business leaders consider “good” (“good” defined as 7 or 8 on a 10-point scale). And, they are 47 percent more likely to achieve growth that business leaders consider “great” over the last 3-5 years (“great” defined as 9 or 10 on a 10-point scale).
The potential benefits from leveraging audit insights resonate with survey respondents as well. C-suite executives and audit committee members noted they would place a higher premium on audits that provide more insights. Nearly all business leaders polled said they would spend more for an audit that provides business insights.
“Audits that deliver sharp, tailored insights and illuminate industry trends can give boards and executives information they can use to help improve operations and performance,” said Adam Weissenberg, national managing partner, audit clients and industries, Deloitte & Touche LLP.
Unlocking the full potential of the audit
Auditors and their clients both have room for improvement when it comes to unlocking the full potential of the audit. Nearly one-half (45 percent) of C-suite executives and 48 percent of audit committee members whose companies don’t always leverage information from their audits do not have processes in place to leverage insights gleaned from an audit.
In addition, 79 percent of C-suite executives and 94 percent of audit committee members assert that making financial statement audit findings more transparent within their organizations would improve their company’s performance.
“Although the survey strongly indicates that many business leaders recognize the expansive value of today’s financial statement audits, many still do not realize its full potential impact,” said Ucuzoglu. “We have a real opportunity to build on what is already a solid foundation in the work that we do to provide companies and audit committees with innovative and valuable insights to consider.”
At Deloitte, audit is more than an obligation. It’s an opportunity to see further and deeper into a client’s business – a powerful lens for illuminating the current state of an enterprise, providing insight that can inform future aspirations. Audits can make organizations better, enhancing trust and helping a multi-trillion dollar capital markets system function with greater confidence. Independent, innovative, and known for quality. Visit www.deloitte.com/us/audit.
About the Survey
The Deloitte Audit Value Survey was conducted by Wakefield Research between August and September 2016 among 300 CEOs and CFOs and 100 executives who serve on audit committees of corporate boards. The survey has a margin of error of 5.7 percent for CEOs and CFOs, and 9.8 percent for audit committee members at the 95 percent confidence level. The full report can be found here and a summary of key survey findings are highlighted in an infographic.
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