What can good auditing achieve?
When auditing works, everyone who benefits from having a clear picture of what is going on in companies wins. And that’s a long list!
Shareholders, including pension funds, are less likely to invest their money in dodgy companies, minimising losses and maximising returns. Staff are less likely to be blindsided by layoffs and pay cuts because their company ran into financial trouble without having enough reserves laid by. Governments, and the taxpayers that fund them, are less likely to have to step in and bail out companies that were reckless with their business model but are too big to fail (i.e. the consequences of them going bust will be so big that governments feel obliged to clear up their mess for them.)
Transparent, understandable and thorough audits can also be used as a pressure or evaluation tool for groups who want to create change in the business world. For example, they could help hold companies accountable to certain environmental goals or allow equality advocates to see how much of a company's revenue is being paid in tax. Aside from this, good auditing makes it harder for companies to engage in fraud and other illegal behaviour. Pretty much everyone would agree that is a worthwhile achievement on its own.
There is also an argument that improving auditing will help improve socioeconomic inequality. Ultimately, the people who tend to gain the most (or at least lose the least) from poor auditing practices are those who stand near the top of the economic ladder: executives who hold high-level, well-paid positions at either auditors or at the firms they audit. Those who stand to lose the most are often nearer the bottom: the employees who will be most affected by layoffs or decreases to their pensions are those who don’t have a lot of money.
Ultimately, all the things that come with good auditing allow trust and understanding to be built up between people and companies. That brings a society together. So good auditing could be a tool we use to make our economies work better for everyone.
