Business approach to auditing;

              Business
to
Walter H. Soderdahl
A s CERTIFIED PUBLIC ACCOUNTANTS, we serve in a dual
capacity. We are professional accountants and auditors,
and we are professional consultants to businessmen. In
this article, I want to emphasize this dual nature of pub­lic
accounting as applied to our principal function—
auditing. What is a good business approach to auditing?
Does it present any advantages over the conventional
approach? What problems are we faced with in imple­menting
a business approach to auditing?
THE BUSINESS APPROACH
TO THE AUDIT PROCESS
Understanding the Client's Business
Fundamental to any well-planned and competently
performed audit is a thorough understanding of the
client's business and the industry of which it is a part.
The auditor needs an understanding of the business- in
order to determine and help resolve problems that may
affect the audit. He needs an understanding of the busi­ness
if he is to be helpful to the client. The requirement
for understanding the client's business pervades all levels
of our firm—from the junior accountant to the partner
in charge—but it is obviously more critical at the top
levels.
Understanding of the business is necessary in order to
serve the client, and the client expects that we will help
him. From his point of view, the help, guidance, and
advice that the auditor can provide is the constructive
part of the audit function and the part in which the
client is interested. Any audit firm can provide him with
a certificate, if one is justified. Of importance to the
client is what an accountant can do for him above and
beyond the regular audit.
Basically, men, the client wants management help
along with performance of the audit. Now, if we were
not equipped to provide such help, Touche, Ross, Bailey
& Smart, and the entire accounting profession might well
have a serious problem. But we do have a specialized
competence in the entire accounting— not just the audit­ing—
function. The nature of our work is such that we
are required to delve into many of the confidential areas
of the business. It is natural for management to want to
share its problems with us. It is natural for us to help
management with its problems.
To implement a business approach to auditing, what
are some of the things an auditor should know about the
business?
24 THE QUARTERLY