The audit expectation gap: what people believe and what actually is . . .
Many years ago at university I wrote an essay on the “audit expectation gap“. Perhaps it was my naivety back then that I believed this gap could be bridged – with clearer communication, enhanced regulation and a more informed business community.
Today the expectation gap between what people believe the auditor’s role to be and what the role IS has never been wider. And the expectations are continuously shifting.
Yet I have never been prouder to be an auditor. Despite what you may read and hear, audit quality has never been better. All of the large firms have invested heavily in audit quality over the last 5 or more years with better technology, training and enhanced processes. This has involved investment in data analytics, digitalising our processes, increasing the use of robotics and automation and improving our smart online audit platform.
As a profession we need to think about how we could add additional value by providing broader assurance over forward indicators.
Auditors are in a unique and privileged position to do this as we spend time within an organisation working across all divisions and locations and with all levels from junior accountants through to the CEO. Our success in the future will rely on leveraging our understanding of the client’s business more effectively than perhaps the ‘traditional’ auditor role has done to date.
Looking further ahead, I see a place for a strong audit profession, able to adapt quickly to expectations and the changing world. Critical to this is the profession’s ability to attract top quality people. With the changing world the skills required of the auditor are evolving and this is reflected in our recruitment strategies, increasingly recruiting grads with degrees that I’m sure didn’t exist when I was at university.
Changing our recruitment strategies to ensure we remain relevant is important. Tomorrow’s auditors will be different. Mundane accounting and auditing tasks will become history.
Graduates won’t join firms and be vouching invoices – they will be solution architects; problem solvers; data analysts, design thinkers or story tellers instead. These are the skills that will drive enhanced Audit Quality.
As an analogy, it’s like saying that calculators undermine basic math skills – they do to an extent, but that is good. The world of professional services evolves as will our definition of basic skills.
In the fast-approaching world of distributed ledgers/blockchain, a deep understanding of debits and credits will be less important and an understanding of IT controls and access controls much more critical.
Already, traditional audit sampling of financial transactions is fading out – analytics tools and machine learning can assess whole populations and identify outliers or anomalies. At KPMG, our use of cognitive technologies is accelerating, with a series of applications currently in deployment that cover intelligent automation through to chatbots and machine learning algorithms.
It may seem fanciful but within 10 years the client finance function could consist of a CFO, a series of bots who process transactions and an AI platform to help with the judgments. The numbers will be accurate, material errors non-existent and there will be a full audit trail.
The value an auditor will then bring is likely to focus on technology and access controls and culture – for a while at least, as the AI platform will be able to assess culture fairly soon!
Audit quality is critical and will continue to be the focus of our future accountants – the skills of our people plus intelligent automation tools makes the future an exciting place.
But before we can enter this brave new world, the most critical thing is that the profession is held in high regard so that we can continue to attract the smartest and brightest.
Media commentators, regulators and academics may all have different views on what the future model of audit should be. But in my opinion, most would agree on one thing – that good, strong, effective auditing is needed now more than ever. And it will continue to be, however it evolves.