Benny Liu


Audit quality and value

Q. It’s being said that the quality of the audit process has not changed recently, despite the fallout from the financial crisis. What are your views on this?

We are far more focused on risk now, and on the need for greater skepticism, especially when dealing with relatively unknown entities. We stress that our people need to consider the behavior of their clients – their motivation and business drivers. We cannot just listen to what clients tell us. We need to be robust about obtaining independent evidence.

Q. How can audit quality be ensured in an environment where delivery costs are rising but prices falling?

The outside world sees China growing and many companies coming out and so they assume professional service firms must be earning a lot of money. But we have a problem here: professional auditors and accountants don’t get the same respect as in more developed countries. Chinese companies still need to understand the value audit firms can provide, and that quality service comes at a cost.

Q. What would auditors do differently if unconstrained by regulation and able to deliver solely what the capital markets want?

Auditors need to understand a company’s management, controls and business strategy. But under existing standards we don’t need to mention these in our audit report or in any of our deliverables to the company. I think some think some kind of assurance or more detailed report on these would be helpful to the market.

Q. Of all the parties that have an interest in an audit, which do you think feels most short-changed by the value it provides, and why? Are their concerns justified, and how can they be addressed?

One of the reasons we are talking about this is because of the financial crisis when people started pointing the finger at auditors wondering why they did not give a warning that some of the banks were facing problems. This all stems from the fact that many people don’t understand our responsibility and our role. This is what needs to change.

Benny is the Lead Audit Partner for China and Hong Kong. He joined KPMG in Hong Kong in 1991 and was elected to partnership in 1998. Benny has extensive experience auditing private entities and enterprises. His portfolio of clients include a broad range of business sectors from the power supply, financial services, hi-tech, consumer products and real estate industries. He has also assisted a number of Chinese enterprises in obtaining listings in domestic and overseas markets.

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