The Future of Audit

Embracing technology — and change

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When I think about the future, a quote I remember from my high school days from John F. Kennedy comes to the front of my mind: “Change is the law of life. And those who look only to the past or present are certain to miss the future.”

I believe that all of us with a stake in the future of audit services, both in academia and in public accounting, understand the importance of grasping how traditional audit services are being transformed by technology. Those of us in practice need to explore all of the tools available to us, to understand and embrace, for example, the accelerating value of data and the digital data ecosystem, which is connected by:
1. The exponential growth of data;
2. Advanced tools for data mining;
3. Everything as a service;
4. Algorithms, data science and data analytics;
5. Machine learning and artificial intelligence; and,
6. Unlimited processing power.

As auditors of the future, we should be focused on leveraging technology to test entire populations rather than using today’s and yesterday’s ideas, which have been focused on sampling.

We must embrace technology to perform most if not all of the tasks that until now we have been performing with staff hours in a processing mode. We must prioritize new techniques like evaluation analytics and spending time more in assisting our clients to perform their ongoing financial reporting tasks more efficiently. We should leave processing confirmation responses and calculating inventories in the past, and redirect our time to providing ideas and industry insight to our clients that harness technology to improve our deliverables.

Since the capital market system will always rely on financial audits and other forms of assurance, we need to understand the evolving needs of those users as well. More interaction with audit committees, CEOs and CFOs, as well as regulators, should be a priority. We need to understand what users of audits want. Undoubtedly, they will want auditors to provide assurance on much more than just financial statements in the future. Investors are in discussions currently about assurance services to support earnings reports and investor presentations. As the capital market system evolves, so will the requests for assurance services to enhance investor insight for more informed decision-making.

Simultaneously, while public accounting firms, standard-setters, regulators and investors are adapting for the future, so must academia. College professors and college curricula need to evolve to incorporate the audit technology tools of the future to prepare the next generation of CPAs, standard-setters, regulators and investors. Tomorrow’s audit services will only be ready and understandable if the next generation of accounting professionals is properly educated in the use of these tools … today! And their education needs to be audit technology-based, not only in learning the standards of the past, but in audit techniques using current technologies as well as new technologies that have not yet been created!

I recently solicited the thoughts of Professor Kate Jelinek at the University of Rhode Island. I chose URI because I was interested in seeing if the curriculum was progressive and future-oriented, as it was in the 1960s and 1970s, when I was an undergraduate student there. (I received the most important professional advice in my career from Professor Brook Sanderson, who had a previous career as an auditor with Arthur Anderson. As my URI advisor, he recommended that I select as a minor as much computer training as possible. He felt that for an aspiring CPA, this would be the most important elective to add to my curriculum.)

Interestingly enough, Professor Jelinek (who is also advisor to the university’s accounting organization, Beta Alpha Psi) told me that her advice nearly 50 years later is to encourage her students to learn as much technology as possible. This knowledge will allow them to understand and use the tools of the future.

Professor Jelinek also discussed how the systems course has changed in order to incorporate an introduction to data analysis, in addition to the traditional topics of accounting systems and internal controls over those systems. The “big data” movement is motivating academia to encourage a “data scientist” mindset in future accountants and auditors. She emphasized how the accounting department’s advisory board continues to prioritize weaving technology into the accounting curriculum. I was very impressed with the emphasis on technology the university is conveying to its students. Undoubtedly the most important investment in the future of audit services is the time we take to educate our future auditors with the current and future tools that they will use.

This article is part of an ongoing series exploring the evolving landscape of the audit and the auditing profession. Other installments include:

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