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Understanding Audit Transparency
Audit transparency is a term tossed around in the financial world with increasing regularity. This paradigm shift is central to the functioning of major corporations and small firms alike. Its influence spans accountancy practises to enhance corporate governance and stakeholder trust. However, many onlookers are still negotiating the complexities of what audit transparency entails and why it matters.
Here at DeFreitas & Minsky LLP, we preach the gospel of audit transparency. It’s our firm belief that in today’s hyper-connected, information-rich society, a commitment to openness, accountability, and transparency in auditing practises isn’t just ethical, it’s good business. Take a moment as we unpack what audit transparency is all about and why it is fast becoming a necessity in the accounting landscape.
The Genesis of Audit Transparency
In the past, financial reporting was clouded in secrecy, making audits a challenging task. This secrecy contributed to numerous cases of fraud and corruption, shaking trust in corporate governance. A study by the Association of Certified Fraud Examiners report (ACFE) reveals that businesses lost a whopping $7.1 billion to fraud in 2018[1]. Audit transparency emerged as the most viable solution to combat this malady.
To instil confidence in stakeholders and ensure public trust, the accounting industry had to overhaul its practices and usher in an era of transparency. Sunlight, they say, is the best disinfectant, and nowhere is it more pertinent than in the financial world. This shift marked the beginning of audit transparency aimed at promoting transparency and minimizing fraud.
Meaning of Audit Transparency
Simply put, audit transparency refers to the disclosure and clarity in auditing practices. It puts all the cards on the table, leaving no room for guesswork or speculation. As per the AICPA’s Professional Standards, the auditor is required to conduct the audit with a thorough understanding of the entity’s flow of transactions[2]. This consists of how transactions are initiated, recorded, processed and reported in the financial statements.
Importantly, audit transparency promotes comprehensive understanding of the audit process and decisions made therein. It’s about ensuring that the stakeholders can see and understand how an audit is performed. By doing this, it removes doubts about the validity of financial statements, thereby boosting confidence in the financial marketplace.
Role of DeFreitas & Minsky LLP in Promoting Audit Transparency
At DeFreitas & Minsky LLP, we pride ourselves on spearheading efforts towards audit transparency. Our methodical and meticulous auditing process is a testament of this commitment. We adhere strictly to the Generally Accepted Auditing Standards (GAAS), providing clients with comprehensive audit reports.
Our teams track transactions from their initiation to their reflection in the financial statements, taking into account all the laws, regulations, and standards along the way. In doing so, we ensure that every step of the audit process is transparent, accountable, and subject to scrutiny.
Why Audit Transparency Matters
Why does audit transparency matter? And why are we, at DeFreitas & Minsky LLP, so passionate about it? Here’s the breakdown:
• Prevent Fraud and Corruption: A study by ACFE found that 40% of fraud cases were discovered through tip-offs, 15% through internal audit while only 3% through external audit[1]. This could be an indication of the secrecy involved in the process. By opening up the audit process, we can disclose ‘red flags’, thereby preventing financial scandals.
• Boost Investor Confidence: Confidence is fueled by knowledge and information. Clear, comprehensible audit reports can give investors the confidence they need to invest. As a report by the PCAOB indicates, investors are more likely to put their money on companies with transparent audit reports[3].
• Ensure Compliance with Regulations: Greater transparency also means stricter adherence to regulations. This makes for healthier, more accountable businesses.
• Enhancing Credibility: Transparent audits lend credibility to the auditing firm. This, in turn, boosts trust in the financial statements prepared by the firms, leading to better decisions by stakeholders.
The Future of Auditing – Greater Transparency
As a Certified Public Accountant in NY, we at DeFreitas & Minsky LLP, see a future where transparency is the norm, not the exception. A report by Deloitte supports this view, predicting that ‘Push for Greater Transparency’ will rank among the top trends shaping audit’s future[4]. Audit transparency is not a mere tool, but a mindset that ensures a level playing field for all stakeholders.
Take a stroll with us down this path of transparency. Such openness can revolutionize the auditing field, leading to more responsible business practices and a marketplace characterized by trust and fairness. At DeFreitas & Minsky LLP, we look forward to leading this transition, not merely witnessing it.
As we march towards a future of greater openness in our financial dealings, we invite all stakeholders – shareholders, investors, regulators and ordinary citizens – to join us. Let us together foster an environment where integrity is king and transparency the highway to sustainable growth.
DeFreitas & Minsky LLP’s commitment is to this vision – a world where trust in corporate governance is restored, and every audit is a shining beacon of transparency and accountability.
The Wrap-Up
Audit transparency, in essence, embodies the old adage that ‘honesty is the best policy’. By embracing openness and accountability, we can tear down the walls of secrecy and mistrust, creating a robust, fair and stable financial world.
DeFreitas & Minsky LLP, with our strong commitment to audit transparency, will continue to lead the charge and inspire others to follow suit. We firmly believe that this path to transparency can usher in a new era of trust, equity, accountability and growth. It’s not just the future we predict; it’s the future we want to shape, one audit at a time.
