A new survey shows public support for a broadening of the roles and responsibilities of auditors in Australia and New Zealand.

The perception is that wider audit scope can provide additional assurance about the new and emerging risks investors and the public face in the information age.

The findings are based on responses from more than 2000 respondents in Australia and New Zealand. Chartered Accountants Australia and New Zealand (CA ANZ) and the Association of Chartered Certified Accountants (ACCA) commissioned the survey to gauge public understanding and expectations of the audit profession.

Debate about the future of audit and how it can evolve to meet public expectations has begun in the UK, and the outgoing chairman of the London Stock Exchange, Sir Donald Brydon, is leading a landmark review into the quality and effectiveness of audit.

Public interest in recent years has extended to many other behavioural aspects of organisations as their role in society has been subject to increasing scrutiny. As a consequence, the demands for assurance are growing.

CA ANZ and ACCA commissioned this independent research to encourage open dialogue between the profession, stakeholders and the public to understand what kind of an audit future people expect.

The results

Overall, knowledge of what an audit is was poor. Only just over one-third of respondents were able to correctly identify that an auditor gives an opinion on whether an entity's historical financial statements give a true and fair view and do not include material mistakes due to fraud or error.

The public have high expectations of auditors when it comes to detecting fraud. A substantial number of respondents expect auditors to always detect and report any fraud.

The primary responsibility for the prevention and detection of fraud rests with those charged with governance of the entity and management. Auditors are responsible for detecting fraud that materially affects the financial statements. However, this is not always possible due to inherent limitations.

The key decisions about the future of a business are taken by its directors, and it is the directors who establish the entity's system of controls and oversight, as well as approve its financial statements. However, more than half of respondents believe audit should evolve to prevent company failures.

Respondents were offered a list of other areas where auditors could be asked to do more. Their first choice was in solvency, liquidity and viability. This is unsurprising as it is consistent with the findings around detecting fraud and preventing company failures, all of which are related.

Technology offers the promise that audits could move away from the sampling of transactions and instead look at most or even all of them. It may also provide additional insights, or assurances, on a broader range of issues beyond financial statements.

While there is a clear appetite for auditors to do more, there was little consensus on whether auditors should get higher fees or more time to do this. Most respondents were willing to accept only a small increase in both audit fees and time.

Any extension of audit procedures will come at a cost. But at the same time, it may be that some aspects of the current financial statement audit are viewed as no longer necessary or desirable, so there could be an offset.

When asked how technology might affect the audit process, the most popular response was that respondents believe it will make audits more efficient. Technology offers the promise that audits could move away from the sampling of transactions and instead look at most or even all of them. It may also provide additional insights, or assurances, on a broader range of issues beyond financial statements.

The survey asked which non-audit services an audit firm should be allowed to provide a public interest entity (PIE) client. These results are particularly interesting because only one in the list of options is not prohibited or restricted by current independence rules.

Overall, the survey findings indicate there is limited support (18%) for new measures such as capping of non-audit services provided to non-audit clients, or ones being discussed in the UK, for example audit-only firms.

What next?

The profession has long spoken about the audit 'expectation gap', and our research highlights the failure of that gap to close, despite continued educational efforts. During this time the corporate landscape has changed dramatically, business models and corporate governance have evolved, but the audit 'product' not so much.

Being clear on what audits are, and are not, covering continues to be an important and needed awareness-raising exercise for the public. But should audit better fulfil public needs, perceived gaps in expectations may narrow or even disappear.

The statutory financial statement audit as we know it could be redefined. We could even move to a modular approach – one that has distinct modules for different types of assurance in various areas that go beyond the traditional core audit.

Nevertheless, it is important that public policy on audit is driven by evidence-based research. We will use the results of this survey to inform our response to the Brydon Review call for views, which is due 7 June. In addition, we would greatly welcome views and ideas from members on the questions raised in the paper.