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Acting on Audit
High quality and independent external audit plays an important role in serving the public interest. This report examines the nature and effectiveness of investor stewardship activity on audit related issues to date, and makes recommendations to other participants in the audit quality ecosystem – companies, audit firms, regulators and investors – as to activities they may be able to consider to effect positive change.
An audit is the independent examination of an organisation’s financial report in order to obtain assurance that said report is 'free from material misstatement, whether due to fraud or error'. Therefore, high quality audit can serve the public interest by:
- reinforcing trust and confidence in the accuracy of financial reporting;
- reducing the risk of inaccurate information or fraud; and
- strengthening corporate accountability to investors through increased transparency.
Railpen has been thinking about audit issues at both its portfolio companies, as well as the broader framework for audit quality, for some time. We therefore wanted to undertake a review of audit as a stewardship issue to help us understand how better to address this with our portfolio companies, as well as to consider how we can most effectively wield the array of stewardship tools at our disposal.
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