Know Your Industry and Your Client:
Jim Cook Explains Ernst & Young’s Approach To Auditing
Jim Cook, with over 34 years of experience in accounting at Ernst & Young, understands the critical role that industry knowledge plays in performing an effective audit. Cook spoke about industry and business knowledge and the public company audit in a mid-October presentation to undergraduates in the Department of Accountancy.
Starting with a brief history of accounting policies since the stock market crash of 1929, Cook explained to students how Ernst & Young performs a successful audit for its clients in light of both new policies in accounting and the growing globalization of the business world. He stressed the importance of global audit management, explaining that uniformity is important to both clients and their investors. “We have to have an organized way to manage that knowledge so we can interact with our global clients,” Cook said.
Ernst & Young categorizes client organizations into seven major categories. Cook told the students that accountants must understand the basic needs of each industry in addition to understanding an individual client’s business in order to produce an effective audit. “We promote knowledge sharing and communication [at Ernst & Young], which is ultimately good for the clients and good for our own risk management,” explained Cook.
Cook also reviewed Ernst & Young’s audit process, citing four key components of the audit: establishing overall client objectives, understanding the business and establishing responding audit strategy, performing the audit, and then providing an overview of the audit for the client. “Audit quality is measured through the passage of time—no risk or fraud should arise undetected by the audit,” noted Cook. Understanding the client’s business is not only important in performing a successful audit, but Cook said it “creates more of a common ground with the client’s personnel,” and is of extreme importance to the client.
Cook completed his lecture fielding questions on new accounting policies and addressing needs of specific clients and with each response stressed the importance of sound industry and business knowledge in the field of accounting.
Cook, a 1971 graduate in Accountancy, started with Ernst & Young upon completion of his undergraduate degree. He is currently the global director of retail and consumer products and the Americas director of industries for Ernst & Young. He has worked with such companies as McDonald’s Corporation, Whirlpool Corporation, and S. C. Johnson and Son, Inc.