2015-07-31-ACI-The_Future_of_Audit_16页_475kb

The Future of Audit Summary

Core Content

This document explores the current state and future direction of the audit profession, highlighting the improvements in audit quality, the evolving expectations of stakeholders, and the role of innovation in shaping the audit landscape. It features insights from audit committee chairs and audit professionals from various global regions, including the U.S., Belgium, Nigeria, Brazil, and Norway.

Main Themes and Key Points

Audit Quality

• Improvement Over Time: Audit quality has improved significantly over the past decade, driven by regulatory reforms, the financial crisis, and increased stakeholder awareness.
• Drivers of Quality:
  • Professional Skepticism and Training: Auditors must maintain a critical mindset and be well-trained to challenge management effectively.
  • Risk-Oriented Approach: Audit committees and auditors are increasingly focused on identifying and addressing critical areas of risk.
  • Linkage Between Internal and External Audit: A stronger connection between internal and external audit functions enhances the overall quality of the audit.
  • Use of Technology: Data analytics and big data are transforming audit practices by enabling more comprehensive testing and analysis of financial information.
  • Transparency and Communication: Open and honest communication between auditors and audit committees is essential for fostering trust and understanding.

Expanded Auditor's Report

• Benefits and Challenges: Increased transparency in audit reports is seen as beneficial for investor confidence, but challenges include the risk of boilerplate language and unclear expectations.
• Stakeholder Expectations: There is a growing call to expand the auditor's report to include critical audit matters and provide more insight into the audit process.
• Opinion on Scope: Some professionals believe that auditors should not be the primary source of non-financial information, as this falls under the responsibility of management and the audit committee.

Audit Firm Rotation

• Supporters: View rotation as a way to bring fresh perspectives and improve audit quality.
• Opponents: Express concerns about the costs and potential disruption, and argue that mandatory rotation might reduce audit quality if auditors "lose a step" in the first year.
• Recommendation: Advocates for rotation with sufficiently long intervals to allow for continuity and expertise development.

Innovations in Auditing

• Big Data and Analytics: Expected to play a major role in the next 3-5 years, allowing for full population testing and more effective risk identification.
• Technology Integration: Auditors are increasingly using data analytics tools to examine large volumes of transactions and detect anomalies.
• Value Addition: Auditors are encouraged to provide more value beyond the statutory audit, such as insights into strategic risks and performance analysis.

Key Insights from Interviewees

• Michele Hooper (PPG Industries): Audit quality is rooted in the engagement team's quality, and the use of big data is a key trend.
• Kees Storm (Anheuser-Busch InBev): Emphasizes the reliability of financial information and the need for auditors to go beyond statutory reports.
• Jakob Stausholm (Statoil): Highlights the transformative potential of data analytics in audit methodology.
• Prof. Herbert Onye Orji (Nigerian Stock Exchange): Notes the improvement in audit quality due to the adoption of IFRS and the use of industry data for sense-checking.
• Jim Liddy (KPMG): Stresses the importance of audit quality control systems, leadership, and the evolving role of auditors in providing deeper insights.
• Carlos Sá (Banco do Brasil / Marisa): Points to the need for a balance between IT use and traditional audit methods, and the importance of experienced auditors in fraud detection.

Conclusion

The audit profession is undergoing significant transformation, driven by technological advancements, regulatory changes, and heightened stakeholder expectations. While audit quality has improved, the profession must continue to adapt by embracing data analytics, maintaining professional skepticism, and fostering better communication and collaboration between auditors, audit committees, and management. The future of audit will likely involve more transparency, more value-added services, and a more integrated approach to risk management and financial reporting.