What are some of the issues and opportunities for the future of auditing?

Most agree the need for comprehensive audits will grow in future. As investors and funds increasingly seek comfort from the validation of audits, the profession will be challenged to provide clearer and more regular information as well as comply with forthcoming regulations.

KPMG believes as investors and regulators require more confidence, there is a clear need for strong and effective auditing of funds. It expects investors, regulators and fund boards to require broader, deeper and more frequent assurance over fund operations. 


According to KPMG, the firm is already experiencing an increased demand for regular valuation assurance, assurance on systems and controls over quarterly and half-year financial statements. Increased complexity of the regulatory environment will require increasing specialisation of fund auditors, believes KPMG. The use of technology to assist the audit process will become more prevalent and will help to deliver a more efficient audit service.

Barry Winters and Garrett O’Neill at KPMG in Dublin say financial reporting is complex and often not well understood. When it comes to accounting rules, the audit profession can help keep the real goals of relevance and understandability in sight, they believe.

Auditors are one of the few groups uniquely qualified to understand complex financial institutions and provide genuine insight about their business, operations and reported information, say Winters and O’Neill.

Auditor liability has been an increasing concern for the auditing profession for a considerable number of years, they note. A number of jurisdictions in recent years have introduced measures aimed at reforming their auditor liability regimes and this is likely to continue.

In Malta, Anthony Pace and Noel Mizzi at KPMG say it is becoming imperative for all funds to be audited by a reliable firm that provides the investor with the required experience and expertise in a constantly changing market.
Professional firms need to ensure they have the required level of knowledge to be able to assist clients through the maze of regulatory and financial reporting requirements, they note.

The fact that hedge funds are less regulated than retail funds only means the auditor’s role becomes more relevant in providing investors, regulators and other third parties with the necessary comfort, conclude Pace and Mizzi.

Colin Hanson at PricewaterhouseCoopers in the Cayman Islands believes investors expect and are demanding increased comfort directly from auditors. At the same time as accounting and audit standards are becoming more complex, there are opportunities to provide other levels of comfort for users of funds, such as controls assurance (SAS 70).

Providing audits on a semi-annual basis is one way to increase the level of comfort to users and investors, says Hanson. “Given the increasing regulatory environment, demand for audits are likely to continue to increase,” he concludes.

Deloitte’s Stuart McLaren says his firm is starting to see more funds launching once again and new strategies and structures developing. 

Julian Young at Ernst & Young in London believes the relevance and importance of audits has never been greater. “The markets lost confidence and auditors have a vital role in restoring it,” he declares.

As for the future, investors are seeking more, rather than less, independent assurance. “This is likely to extend beyond the financial results of a fund. The demands for independent assurance over the investment process, administration, treasury and risk management functions will increase,” says Young. “We anticipate significant increases in the extent and scope of independent assurance reports (SAS70 and AAF). It will not be long before investment managers and funds will want to have this type of reporting as standard,” he concludes.