Episode Transcript
The Finance Ghost: Welcome to this episode of the Ghost Stories podcast. I've got the team from Forvis Mazars back in the mix here and someone we haven't spoken to before, which is always very exciting: Yolandie Ferreira.
She is a partner at Forvis Mazars and, more importantly, certainly for the purposes of this podcast, she is also the Head of Audit Africa.
It’s going to be a very interesting discussion because what we will be talking about on this podcast is that your auditor is actually a strategic business choice, it's not just a compliance exercise. It's the source of confidence in your business for your stakeholders. It's about more than just signing off the numbers – it's actually a trusted advisor that you are bringing into your business.
And I must say, as the team pointed out to me when we were deciding what to cover in this podcast, it's possible to go your whole career actually, as a CFO, without really having to go through a change in auditor. It can just depend on lucky timing.
So, sometimes you come across these things. Maybe you’re not sure exactly what to think about when choosing an auditor or changing an auditor. If that sounds like something that will resonate with you, then stick with us because there's going to be lots to learn.
Yolandie, thank you so much for joining me on the show. I'm very excited, personally, to learn from you because I'm not that jacked up on the world of audit, actually.
Yolandie Ferreira: Thank you. It's great to be here. I hope that I can enlighten you and your listeners today to certainly understand that auditors are not all grey – and not always men, either. So, there's a lot of value that can be added to businesses and, as you said, strategically, through the right choice of an auditor.
The Finance Ghost: Yeah, absolutely. It’s very cool to chat to you today.
Let's talk about the decision to change auditors, because as I said, it's not something that every CFO goes through.
I remember from my corporate finance days, you'd have the same thing on large corporate restructures, or M&A. Not every CFO has dealt with this and then suddenly they find themselves in charge of a project which is actually almost fundamental to the business and which, if you get it wrong, can actually be an existential issue. And I guess, choosing your auditor can be right up there in that regard.
So, perhaps you can kick us off by just understanding the decision to actually change auditors, what the drivers of that would be, and then what the typical timing of that decision would be, as well.
Yolandie Ferreira: Absolutely. It's one of the most common misconceptions that companies only change auditors either when something has gone wrong or when regulation requires them to.
For a long time in South Africa, regulation didn't actually require companies to change auditors, but that changed with the new firm rotation requirements. That's been in place for a number of years, so most CFOs at large corporates have probably gone through one change in auditors.
But CFOs also don't always stay in that position. As you say, it's very possible that a CFO goes into a position, has been there for a couple of years, and then all of a sudden has to change auditors.
The thing that I see go wrong most often is that the CFO or audit committee is not focusing holistically on the process, but rather has an idea in their mind of what the auditor should be looking at right at this moment – so, either because there has been a problem in the company, or because there's a preconceived idea that the auditor is only going to look at the past and issue an audit opinion and then move on and we'll see them next year.
So, the timing is very important, because you want to have enough time between when you appoint a new auditor and when they need to issue their first report for the auditor to really gain a good understanding of the business. The audit report – and the auditor – are only going to be as good as their understanding of the business and the challenges that the business faces.
Anyone can probably sign off a set of financial statements and issue an audit report (well, I guess, any auditor could do that), but really adding value through that audit report is something different. That's not something that any auditor with any standard experience would be able to provide to a company.
The Finance Ghost: Let's start to dig into some of those concepts, because I think that's where it's difficult for someone who hasn't worked closely with an audit team at that level to understand.
And certainly, for outside stakeholders, they see an audit report and they incorrectly assume (even though it generally says it), “Oh, this is audited by a big brand audit firm. Hence, it must be completely free of misstatements, fraud…you know, take your pick.” It's like, “This is the silver bullet. We've caught everything.”
That's not really how this works in practice, as we know, and there is additional value that you bring to it through sector expertise and that kind of thing. So, perhaps just deal with some of those misconceptions for us, and then also just walk us through the value of knowing a sector, for example, or maybe of being an auditor who understands listed versus unlisted companies and multinationals and those sorts of concepts.
