Chief executives, chief financial officers and managing directors of organisations rarely purchase financial audits as a ‘nice to have’ or for their own enjoyment and pleasure. They demand time, attention and process discipline. In the fast-paced day-to-day environment of running a business, with multiple demands and pressure on senior leaders to deliver success, it is easy for a financial audit to become a non-priority task.
And yet, despite the complexity and cost, many senior leaders deliberately choose rigorous, high-quality audits that go far beyond minimum statutory requirements. Why is this the case? The simple answer is because the consequences of getting financial reporting wrong are severe, professionally, organisationally and personally.
A well-executed audit is about protecting leaders from the reputational, commercial and regulatory damage that arises when financial information fails under scrutiny. It is also about ensuring that decisions are based on numbers that truly reflect economic reality. And ultimately, it is about safeguarding trust, from boards, investors, lenders, regulators and employees.
As one CFO recently put it: “A basic audit only works if nothing goes wrong. The real test is how it holds up when something does.”
So, what do leaders need to consider when it comes to approaching a financial audit, what are the different types, what’s involved and what does ‘good’ look like?
What is a financial audit?
At its core, a financial audit is an independent examination of an organisation’s financial statements. Its purpose is to determine whether those statements give a true and fair view of the company’s financial position and results, and whether they comply with relevant accounting standards.
But while that definition is technically accurate, it understates the real purpose of an audit from a leadership perspective. A high-quality audit is not just about compliance. Crucially, it is about assurance.
What do we mean by assurance? There are several important facets:
- the company’s decisions are being made based on reliable information
- accounting policies reflect commercial reality
- risks are identified early
- governance processes are functioning
- financial stewardship stands up to scrutiny
- stakeholders will not face surprises
Taking all these elements into account, an audit becomes a key part of an organisation’s risk management framework and a critical tool for leadership oversight.
The main types of audit
‘Audit’ is often used as a catch-all term. However, there are several types of audit, mostly financial, that serve different organisational purposes. Choosing the most appropriate type of audit is key to meeting an organisation’s strategic objectives.
A basic audit only works if nothing goes wrong. The real test is how it holds up when something does.
The main types of audit are:
Statutory audit
This is the annual financial audit required by law for many companies based on size thresholds. Its scope is defined by regulation and auditing standards, with a focus on providing independent assurance over the financial statements.
Voluntary audit
Many organisations below the statutory threshold still choose to have an audit. This is most common in high-growth businesses preparing for investment, companies with debt covenants, organisations where shareholders are not involved day-to-day, and in companies planning future exit or succession events. The rationale for a voluntary audit follows the same premise as a statutory one: better data, stronger governance and greater confidence.
Internal audit
Internal audits assess processes, systems and controls rather than financial statements. While separate from the statutory audit, internal audit findings often influence the external auditor’s risk assessment and understanding of the business.
Assurance reviews and ‘audit lite’ engagements
Some organisations opt for independent reviews that provide limited assurance at a lower cost. These engagements are valuable in documenting oversight but do not provide the depth, challenge or defensibility of a full audit.
Why high-quality audits matter for senior leaders
Only a high-quality financial audit provides the depth of scrutiny that stands up under real-world pressure. The level of challenge it presents to senior leaders is the key distinction.
There are several key considerations to make when thinking about audit requirements for an organisation.
Accountability and public exposure
When something goes wrong financially, the first question asked, both internally and externally, is always the same: “Why didn’t finance catch this?”
This assumption generally places chief financial officers and managing directors at the centre of accountability. This view isn’t always fair, but it is the assumption that is made. And with an inquisitive media, internal leaks and external stakeholders taking a keen interest, financial reporting issues very rarely stay private. In fact, they often become defining events for leadership teams.
The potential for financial restatements, corrections, covenant breaches or investigations can immediately damage trust and erode credibility, prompting stakeholders to question leaders’ judgement, attracting regulatory and media attention, and creating uncertainty among employees. It’s vital to recognise that the market does not distinguish between an accounting issue and a leadership failure. To external stakeholders, they are one and the same.
Undergoing a high-quality audit provides vital independent evidence that difficult judgements were challenged, assumptions were tested, risks were identified and discussed, and that the organisation’s finance function exercised appropriate oversight. This evidence matters immensely when events are viewed in hindsight.
It won’t come as any surprise that regulators rarely accept ‘we didn’t know’ as a defence. Therefore, from a governance perspective, chief financial officers and boards are expected to demonstrate robust oversight.
Strategic organisational events rely on audit quality
New debt financing. Private equity investment. A trade sale, management buyout, IPO or refinancing. When potential investors and funders are looking at an organisation, the first thing they will examine is audited financial statements.
Long before senior leaders enter the boardroom for negotiations, the numbers will have been reviewed in detail. At that point, first impressions are formed, and due diligence expectations begin to take shape. Robust accounting policies, especially around revenue, leases, impairments, complex estimates and judgmental provisions, set the tone for any transaction.
A high-quality audit ensures all these areas have been examined thoroughly. In turn, when due diligence starts, there are fewer surprises, fewer delays and fewer pricing adjustments. Additionally, where an organisation is making capital allocation and dividend decisions, covenant assessments, M&A choices or long-term strategic bets, audit quality directly affects leadership judgement.
Regulatory expectations
It won’t come as any surprise that regulators rarely accept ‘we didn’t know’ as a defence. Therefore, from a governance perspective, chief financial officers and boards are expected to demonstrate robust oversight, embed independent challenge, maintain evidence of decision-making processes and ensure financial reporting risks are actively managed.
A superficial audit can actually increase risk because it provides false comfort. In contrast, a rigorous audit creates a defensible record of governance and stewardship.
What does a high-quality audit look like?
When assessing the strength of an audit, it’s not about the number of schedules requested, the length of meetings, how many boxes have been ticked or the volume of documentation. Instead, it is defined by the quality of challenge.
Key characteristics of a high-quality audit include:
Informed challenge of judgement
Experienced auditors understand where things go wrong in businesses. They know how revenue can be misapplied, how estimates can drift, and how pressure can distort reporting. Quality comes from asking the difficult questions that uncover these risks.
Focus on materiality and real-world risk
Good auditors don’t waste leadership time on trivial items. They focus on the areas that matter. These include cash, revenue, estimates, provisions, contracts, impairment, inventory, going concern and fraud risk.
Early identification of issues
Management should never discover major issues only at the end of an audit. A strong audit process keeps communication continuous and transparent, flagging up any early signals of an issue emerging.
Clear, honest conversations
Professional scepticism is an essential auditing skill. The best audit teams build constructive relationships where challenge is expected, not avoided.
Documentation that protects leadership
Quality documentation ensures that decisions are defensible. If issues arise years later, the organisation can demonstrate that proper governance processes were followed. A high-quality audit is designed to protect decision-makers, not simply to satisfy regulations.
When audit quality really matters
Audit quality becomes most visible during key business events, including:
- Raising capital or refinancing – lenders and investors scrutinise the numbers first. Clean, defensible accounts speed up the process and improve credibility.
- Preparing for an exit – robust financial reporting reduces price chips and due diligence challenges, accelerating transactions.
- Navigating downturns or unexpected shocks – good audit documentation provides evidence of sound leadership judgement when decisions are reviewed retrospectively.
- Responding to regulatory or stakeholder scrutiny – a strong audit process delivers the evidence base leaders need.
- Managing fast-growing businesses – rapid growth strains processes. Strong audits help ensure reporting remains anchored in reality.
A high-quality audit is not about finding problems. In fact, it is about ensuring that, if problems exist, they are identified early, privately and professionally.
Key takeaway: robust audits are a leadership tool
A high-quality audit is not about finding problems. In fact, it is about ensuring that, if problems exist, they are identified early, privately and professionally. Senior business leaders do not want to be discovering any gremlins later down the line under public scrutiny.
For chief financial officers, a rigorous audit protects oversight, ensures credibility, and supports informed decision-making. For managing directors and chief executives, it protects trust, reputation and leadership authority.
Senior leaders do not choose high-quality audits because they enjoy compliance. They choose them because they understand the cost – financial, strategic and personal – of getting financial reporting wrong.
This is why organisations partner with firms like BHP: not to satisfy regulation, but to confidently navigate risk, protect leadership, and make better decisions. Our audit teams are experienced in dealing with complex, judgement-heavy areas, so we are comfortable challenging assumptions at senior levels, always with professionalism and respect. We also prioritise the areas that actually drive financial reporting risk, ensuring senior leaders spend time on what matters most. We recognise that finance leaders must defend financial information long after the audit is completed, and the audit process is designed to support those fiduciary responsibilities. For that reason, we prioritise defensibility over speed. Our priority is ensuring the audit can withstand the most intense scrutiny from investors, regulators, or future buyers.
Want to know more? Speak to a member of the team.
This material is for informational purposes only and should not be relied upon as professional advice.
