by Robert Purse
Business is nothing but a trust chain. As one of my colleagues has eloquently put it, “A customer
buys; it is an expression of trust. You
hire someone; it is an expression of trust.
An investor invests; it is an expression
of trust. Trust itself is the sum total of
several such entrustments.” Any
break in the chain can have major
consequences for all parties; it
is therefore in the interest of all
parties to ensure that the trust
chain is never broken. (I have used
the word “business,” but the trust
chain is a principle that should
apply in and to all organisations.)
An audit is a systematic and independent
examination of books, accounts, statutory
records, documents, and vouchers of an
organization to ascertain how far the
financial statements as well as non-financial
disclosures present a true and fair view of
the concern. It follows that it is essentially
an inspection, not an investigation.
It follows from the above that, whilst
an audit may well provide an effective
mechanism for identifying real—or
and irregularities, it does not necessarily
identify root causes. There may be an
apparent correlation between any anomalies,
inconsistencies, and irregularities, but
correlation does not equate to causality. The
identification of the root causes of these
aberrations requires forensic investigation.
Audits and corporate governance
My particular interest in audit springs
from its increasing application to corporate
governance and, inter alia, compliance.
An audit, conducted by an independent
organisation, should quickly reveal any
apparent failures by an organisation. It will
not in all probability identify the underlying
causes or reasons. Apparent failures should
not result in automatic condemnation; any
organisation that is subject to an audit must be
given adequate opportunity, before the audit
report is finalised, to respond to the audit
findings. This “apply or explain” approach is
Non-financial audit in a
corporate governance context
» Business is nothing but a trust chain.
» Non‑financial audits are central to effective compliance and corporate governance.
» Non‑financial audits, like statutory financial audits, must be conducted honestly, objectively, and with integrity.
» Good planning, preparation, and monitoring are crucial to successful non‑financial audits.
» Non‑financial audits should be integral to the processes and systems that underpin effective compliance and