Business leaders want to work more effectively with their auditor, feel they can rely on their partner's professional and industry knowledge, and expect more personal presence from them, according to a recent survey by International Consulting Team Audit Ltd.
This year, for the first time, we asked 94 owners and managers of companies operating in the SME sector in Hungary about their general expectations and experiences of the work carried out by their auditors in the course of their cooperation.
The survey started at the beginning of the process, with the appointment of the auditor. We also sought answers to the question of the criteria that owners use to choose their auditor. The responses revealed that very few, only 19% of the companies surveyed, choose their auditor from many candidates, taking into account professional and industry knowledge. More than 80% of the respondents choose based on some form of recommendation.
The survey also shows that in general (60.6%), companies choose their auditor in the second quarter and a very high percentage (55.3%) choose their partner for a maximum of 5 years. It is also clear that company managers are very loyal to their auditors, with 93.6% of the companies surveyed not terminating the auditor's mandate before the end of the mandate. Considering the subsequent data, it may not be the case that this result is so outstanding only because of loyalty.
Interview with Gábor Gulyás partner, lead auditor (In Hungarian language):
40.4% of respondents expect their auditor to provide tax advice. This is an interesting statistic because the chosen auditor should not provide advice to an existing client that could compromise their independence. However, 40.4% of company directors also consider their auditor as a tax advisor. According to the respondents, 56.4% of auditors do not detect accounting errors and discrepancies.
Following the annual audit, the auditors can issue a management letter. The content of the management letter is not prescribed by law. In general, it can contain a lot of useful and instructive information and suggestions that can be of great help to owners in making future strategic decisions. Yet, nearly 70% of company directors do not receive such a management letter from their auditor, receiving only the minimum service. The majority of these respondents did not even know what the content of the management letter was.
Of course, the needs raised in the survey are partly understandable from a business management perspective. It is also difficult to reconcile the needs with the service due to strict chamber requirements and independence compliance. In many cases, these clash with expectations, which contributes to the mixed picture of the role and importance of auditors that is evident from the survey.
What is certain is that more presence, more effective collaboration (e.g. personal meetings, mid-year audits) and strategic support (e.g. management letters, ongoing communication) can support mutually beneficial and successful cooperation.
The survey was conducted between July and August 2021. Personal, online and telephone interviews with owners, CEOs, CFOs and decision-makers of 94 domestic companies in the SME sector.
Survey 2021 - International Consulting Team Audit Ltd - Hungary: DOWNLOAD