Looking back from 2030, the last 10 years have seen a dramatic change in audit, both in terms of the way an audit is performed and in terms of the scope and focus of an audit.
As technology has evolved it has been necessary for both our clients and us to embrace the enhancements. The use of AI is now a common-place and routine tool in our audits and in the way clients operate their business. Blockchain has also changed the way our clients record and process their data. This has created challenges as the need for more advanced cyber security has become a given. Further, the skills needed in an audit practice have changed. Gone are the days of auditors manually agreeing transactions to hard copy documentation. Our audit tools now are able to tap directly into client systems and, in some cases, provide ‘real time audit’. Whilst financial reporting skills remain important, our audit staff are more focussed on being able to utilise Data & Analytical tools as part of the audit. The need to embrace technology has applied across all levels – from audit partner down.
There are some significant benefits to the new world of audit – not only does it make our testing more effective and open up new insights from a client perspective, it also makes the job more interesting and appealing for those working in audit.
It is important to note that, notwithstanding the advent of AI, the human element of an audit is key. The people working in our firm remain a key asset which needs to be managed and developed. In addition, the role of judgment ultimately cannot be eliminated by AI, nor can client relationships. This takes me to the second key change…
For many years, the scope and purpose of an audit did not change significantly. However, after a number of corporate failures in the first two decades of the century, together with a changing global environment, regulators took a fresh look at the purpose of the audit and the assurance that stakeholders wanted. The historical transaction element of the old style audit remains, however there have been changes:
- there is now much more focus on the need to provide confidence over the future performance of the client’s business – where we now provide limited assurance over the prospects of the business as well as its financial strength.
- given regulators now supervise companies using data feeds rather than paper forms, our testing of regulatory returns merely consists of testing the data feed for signs of manipulation or weakness
- there are specific areas such as the client’s approach to managing climate change risk and auditing its carbon footprint which now fall within the remit of our work.
However, all of these areas require significant judgment and include the consideration of non-financial measures. Again, this reinforces the view that judgment cannot be eliminated by AI.
In summary, I would say embrace the technological change and be flexible to adapt to new models. But always remember that people remain at the centre of both our customers’ businesses and our own.