Scott Sink of Birmingham, Alabama is a senior executive and Energy Division practice leader at McGriff, Seibels & Williams, Inc. Active with the Risk & Insurance Management Society (RIMS), Birmingham professional Scott Sink attends the organization’s annual conference.
A recent RIMS’ Risk Management article brought focus to the role that the external audit plays in providing checks and balances as well as in ensuring that stakeholders and regulators have accurate information about companies’ risk profiles and finances.
A legal requirement among large companies, external audits provide clean bills of health to those companies with sound fundamentals, as well as “qualified statements” and “adverse opinions” when issues arise. A “disclaimer of opinion” report reflects a situation in which management or conflicts of interest have prevented auditors from doing their job in the proper manner.
Accounting errors, objectivity issues, and quality of reporting have increasingly become an issue, with Big Four audit firms drawing particular attention for high-profile defective audits. According to the RIMS article, there are many proposed ways of boosting audit quality, from regulatory action to better board and industry policing. One issue is that, with proprietary technologies and intellectual property in play, it is no longer simply enough to look at balance sheet performance to get an accurate assessment of where a company stands financially.
Scott Sink 