Audit Srategy – Business Risk Approach

The audit profession experienced remarkable changes during the period 1980-1990, which led to
a change in financial audit strategies; these changes are the result of the considerable work of the
CA profession internationally.

The change in audit strategy is due to the inability of the traditional approach to deal with all the
risks that can influence the business activity. Indeed, this approach considers that the most
important risks are those related to accounting data. Going further, the traditional approach does
not require the auditor in formalizing the data to put in place the appropriate procedures.

Furthermore, customers say that auditors are no longer able to identify fraud and business
difficulties, which creates a difference between their needs and the work done by the auditors.

This situation has consequences; the reputation of audit firms is threatened by these judgments,
which resulted in a reduction of fees in response to this situation.

As a result, the thinking of the accounting profession led in the late 1990s to the design of new
audit strategies, which responded to the inherent weaknesses of the traditional approach and the
satisfaction of external needs for the users of financial information while creating benefit for the
auditor’s profession. Indeed, these strategies ensure a better determination of the audit risk with
the introduction of the concept of business risk, in order to help the auditor to assimilate the context
of the preparation of summary statements. In addition, the business risk approach has introduced
new techniques; for example: the strategic analysis, the analysis of the influence of the
stakeholders …, which allowed the auditor to examine aspects, considered essential by the
customer.

However, these new strategies present difficulties. Indeed, the first obstacle concerns their
implementation, which requires a restructuring of the audit firm, as well as the establishment of
an effective internal control system within the audited company, which, from one side, leads to a
new approach the independence of the auditor; because he is looking for other services
complementary to its mission, namely the council. Thus, in the context of the informatisation of
the audit process, audit firms reduce the number of controls and tests applied during the audit
mission, which raises doubts among clients as to the relevance and reliability the opinion
expressed by the auditors.

Keywords: audit strategy, risk, fraud, business risk, fees, traditional approach, Business Risk
approach, added value of audit, auditor independence, internal control system, strategic