- Key Insight: See why artificial intelligence can replace specific parts of the public company audit process — but not others.
- Expert Quote: "There's a transition period and we need to understand that." — Jim Logothetis, Chairman, PCAOB
While artificial intelligence can already do important parts of the audit, Public Company Accounting Oversight Board Chairman Jim Logothetis thinks there will always be a place for human auditors.
"In terms of auditing … an audit is part science and part art," he told attendees at an Axios Live event, "Trust and Innovation in Capital Markets," last week. "The science, the transaction part of it, can be replaced, can be done by AI. It can be done by machines. It's been done already."
But he continued, "The art piece of it, which involves professional skepticism, and it involves judgment, involves understanding of what you're looking at from an industry point of view or whatever the case might be, that requires people."
"The accounting profession is not going away," added Logothetis, who spent much of his career with Big Four firm Ernst & Young. "The accounting profession will actually, I believe, be stronger. But in the meantime, like everything else, there's a transition period and we need to understand that."
The elements of that transition will certainly involve regulators and legislators trying to figure out their role, and whether and how they need to take action.
"It's easy to jump to conclusions and say, 'You got to do this, you got to do that,'" he noted. "But as an auditor, as a prudent regulator, you first have to understand what we're talking about. And so I always think about appropriate cost-effective regulation, and that's what we're going to do."
Taking a careful approach to regulation that is cognizant of the compliance burden it may create, of course, doesn't mean weakening the board's core mission.
"The PCAOB was created to focus on one thing and one thing only," he reminded the attendees. "And that mission is to protect the investors, to advance the public interest through quality audits."
The total market value of U.S. public companies has increased enormously over the past three decades since the PCAOB was founded, he noted, rising from $11 trillion in 2001 to $75 trillion now, and while it is only one part of the ecosystem that protects investors, he thinks it's in important part not just in safeguarding the market, but in helping it grow.
"I think it can continue to play a critical role in the advancement of the capital markets," he said, "getting more companies to go public and so on and so forth."
Introductory bullet points created by AI with editorial review.
