How can an auditor help your business? From corporate demergers to mystery shopping
An auditor’s role extends far beyond reviewing financial statements. Auditors can support businesses through reorganisations, the implementation of new accounting requirements, data analysis, internal process reviews and even unexpected assignments.
In a cold-storage warehouse at minus 20 degrees Celsius, even an ordinary ballpoint pen stops working. The auditor, however, still has a job to do.
‘We were given fur hats and coats and got on with the job. We had to record the inspection results in pencil, because it was only once we were inside that we discovered an ordinary pen simply would not write in such cold conditions. We were also surprised to find that the warehouse was not automated and that a forklift operator was working in those conditions,’ recalls with a smile Jozef Lukča, Audit Director at BDO.
This experience is a reminder that an auditor’s work can look very different from what most people imagine.
Most people associate auditors with financial statement audits. What else does the profession involve?
Financial statement audits are an important part of our work, but an auditor’s expertise can be applied in a much broader range of situations.
An audit requires us to understand how a business operates, how its figures are generated, who is responsible for each process and where the risks lie. We examine its accounting, information systems, contracts and internal controls, as well as the links between individual departments.
The ability to view a company as an interconnected whole is equally valuable when a business is undergoing significant change or facing an unusual challenge. This was the case when an automotive client was demerging its Slovak business, with the intention of separating and selling one part. In the automotive sector, invoicing processes are highly automated, so any change can require extensive preparation. Jozef Lukča supported the CFO throughout the project. Together, they considered the right timing for communications with suppliers and business partners, developed potential scenarios and assessed how the demerger would affect the financial statements.
Demerger of an automotive business
One part of an automotive business was to be separated and subsequently sold. In this sector, ordering, invoicing, logistics and communication with business partners are largely automated and closely interconnected.
A change to one process affected multiple systems, accounting operations and relationships with customers and suppliers.
An experienced auditor was seconded to support the CFO, map the relevant processes and identify the accounting, tax and operational implications.
The business unit was successfully separated while maintaining operational continuity and sound relationships with all parties involved.
- A formal demerger alone was not enough. The team had to determine precisely which transactions, customers, suppliers, contracts, data and accounting items would belong to each part of the business.
- All customers and suppliers had to be informed at the right time. We needed to develop scenarios for a range of situations and assess the potential impact of the demerger on the financial statements and related tax matters.
In a reorganisation, it is not enough to know what the company wants to change. You need to understand everything connected to the process and identify everyone the change will affect.
Jozef Lukča, Audit Director at BDO
Can a company engage an experienced auditor on a temporary basis?
Yes. A company may need a specialist for a defined period or project without having the required expertise in-house.
An auditor can temporarily support the CFO, accounting department or project team. This may include mapping processes, developing scenarios, assessing accounting implications, facilitating communication between departments or implementing a new solution.
This type of support can be valuable during a reorganisation, the sale of part of a business, a company integration, an information-system change or a sudden shortage of experienced staff.
In what other situations can an auditor help?
Corporate reorganisation
Process mapping, assessment of accounting and operational implications, and scenario planning ahead of a demerger, sale or integration.
Implementation of accounting standards
Embedding new accounting requirements into specific processes, data requirements and system configurations.
Data analytics and reporting
Identification of anomalies, unusual transactions and indicators that help management make better-informed decisions.
Compliance and gap analysis
Comparison of how internal processes operate in practice against legal, regulatory and internal requirements.
Forensic analysis
Review of transactions, documents, data and processes where misconduct or a breach of rules is suspected.
Mystery shopping, whistleblowing, ethical hacking and litigation
Testing how internal rules work in practice, investigating whistleblowing reports, identifying technological vulnerabilities, and analysing financial data and evidence in litigation.
Implementation of IFRS 16
Another example is the implementation of new accounting standards. Jozef Lukča, Audit Director at BDO, was involved in developing, testing and implementing an IFRS 16 solution.
IFRS 16 significantly changed the accounting treatment of leases. The company needed to understand how the new requirements would affect its accounting, financial statements, internal processes and systems.
The team therefore developed scenarios for the future solution, tested how it worked and assessed whether the results met the requirements of the standard.
When accounting rules change, a company needs to translate technical requirements into specific processes, data and system configurations.
Jozef Lukča, Audit Director at BDO
Analysis of a bank’s loan portfolio
‘We also worked on visualising loan portfolio data.’ On one project for a bank, the team developed a tool for analysing and visualising its loan portfolio. Technical specialists built the tool, while Jozef Lukča designed its logic and structure to ensure that the results were clear and practical.
The tool could flag, for example, unusual interest rates or terms that differed significantly from the rest of the portfolio. This enabled management to identify cases requiring further attention more easily.
The solution was used during the audit and also provided a basis for management reporting and the presentation of results.
What can an auditor uncover in data?
Data alone does not provide the answer. You need to know what to look for, which relationships to compare and what a particular anomaly might mean.
Audit and data teams can identify unusual transactions, exceptional pricing or interest terms, missing data, duplicates and cases that deviate significantly from normal patterns.
The next step is to review the relevant contracts, processes or decisions and determine whether there is a reasonable explanation for the anomaly.
We can analyse what the data contains. The key is then to turn the findings into information that management can act on.
Jozef Lukča, Audit Director at BDO
How are internal processes assessed for compliance with legal requirements?
In one cross-border project, a BDO team helped review the local branch of a company operating as an intermediary for insurance and financial products.
The client described how its individual obligations and internal controls were designed. The team’s task was to assess how these processes worked in practice and compare them with the applicable legal and regulatory requirements.
The result was a gap analysis
Management received a clear overview of which processes were properly designed and where additional controls, documentation or clearer accountability were needed.
What does forensic analysis involve?
Forensic analysis focuses on situations involving suspected misconduct, breaches of internal rules, conflicts of interest, data manipulation or other unusual activity.
It may involve analysing transactions, documents, electronic data, communications and internal processes. The aim is to reconstruct objectively what happened, how it occurred and what evidence or relevant links are available.
The findings may support management, an internal investigation team or legal advisers, or provide expert evidence in litigation.
How does mystery shopping fit into an auditor’s work?
Mystery shopping can be used to test whether the rules established by management are followed in real customer interactions.
A company may have detailed policies, training and control mechanisms in place, yet actual practice at a branch or within a sales channel may be quite different.
Mystery shopping can assess, for example, whether an employee provides the customer with all mandatory information, follows the prescribed procedure, presents the product correctly and complies with consumer-protection requirements.
The results help identify gaps between a formally designed process and the way it is applied in day-to-day operations.
Whistleblowing, ethical hacking and litigation
Working with a broader team of specialists, BDO can also help establish whistleblowing processes, investigate reports and assess the effectiveness of internal controls.
Technology risks may require collaboration with cyber security and ethical-hacking specialists. Technical testing can uncover vulnerabilities in information systems, while an auditor’s perspective helps assess their impact on the company’s processes, financial data and control environment.
In litigation, an auditor or forensic expert can analyse financial data, quantify the economic impact of an event, review how damages were calculated or reconstruct a sequence of transactions.
What kinds of problems can a company bring to an auditor?
Beyond a conventional audit—whether statutory or voluntary—clients do not always need to approach us with a precisely defined request. Often, it is enough simply to describe the situation they are facing.
It may be a process that has stopped working, figures that management cannot explain, a planned reorganisation, a suspicious transaction, a new regulatory requirement or a system that does not provide the information the company needs.
The auditor’s role is to define the problem accurately, identify the relevant connections and propose a way forward. In some cases, the audit team can provide the solution; in others, tax, legal, technology or other specialists may need to be involved.
I would encourage companies simply to tell us what is troubling them. If you ask the question, you will get an answer—and with us, a practical solution as well.
Jozef Lukča, Audit Director at BDO
The auditor as investigator, analyst and temporary member of the team
An auditor’s work can lead from the boardroom and the analysis of thousands of data records to a cold-storage warehouse at minus 15 degrees Celsius.
The common thread is the need to understand how the business really operates: how its figures are generated, where its data is stored, who performs each control and what may happen when one part of the wider system changes.
Sometimes the outcome is an audit report. On other occasions, it may be a new reporting tool, a successfully completed demerger, an implemented accounting standard, an identified process gap or the answer to a question no one in the company had previously thought to ask.
Frequently asked questions about audit and related services
What does an auditor do besides auditing financial statements?
An auditor can assist with corporate reorganisations, the implementation of accounting standards, data analytics, internal controls, compliance reviews, forensic analysis and the temporary reinforcement of a finance team.
Can an auditor help with a demerger or the sale of a business?
Yes. An auditor can map processes, identify accounting and operational implications, develop scenarios and help coordinate changes affecting systems, data and relationships with customers and suppliers.
What is forensic analysis?
Forensic analysis is a specialist review of transactions, documents, data and processes intended to clarify suspected fraud, breaches of rules or other unusual activity.
What is a compliance gap analysis?
A compliance gap analysis compares a company’s current processes with legal, regulatory or internal requirements. It identifies deficiencies and sets out recommended actions.
Can an auditor develop management reporting?
An audit and data team can design the analytical logic, identify key indicators and prepare a tool or visualisation that helps management detect anomalies and make informed decisions.
Are you facing a challenge that does not fit into a standard category?
Tell us about your situation. Together, we will identify the relevant connections, involve the right specialists and propose a solution tailored to your company’s specific needs.
Contact us