At the crossroads: Choosing a new path, maybe auditors need to take it

Some say that the auditing profession is at a crossroads and that now is the time to take stock of what audit can do to enhance its value in the public interest.

While investors seek to regain trust in financial reporting, some say that the auditing profession is at a crossroads and that now is the time to take stock of what audit can do to enhance its value in the public interest.

With the light shining on the role of auditors and how they can contribute to restoring market confidence in financial reporting, how do auditors respond to the evolving expectations about the value of the audit and the role of the auditor? That is a question exercising bright minds across the globe right now.

External users of audit services are looking to drive the maximum value from an audit. They believe there is more that can be obtained than just the standard pass/fail report on historical financial statements. But unlocking the value of an audit is challenging at the best of times given that the requirement for an audit is often driven by legislation, and auditors perform the audit in accordance with rigorous standards designed to meet regulatory reporting requirements, subject to independent oversight by audit inspectors. It is becoming even more challenging as financial information and assurance needs change in today’s complex global environment.

Changing the role of audit also raises many questions, such as: Is today’s information auditable? To what extent should auditors be involved with it without assuming management’s role as primary provider of information? Does the auditor have the necessary competencies to audit it? Do audit processes allow auditing of the information on a timely basis? Can auditors meaningfully report their involvement in a way that users will understand? Are users willing to pay the additional costs? But the biggest question is probably: where do you start?

As 2012 comes to a close, it is safe to say that the journey has a way to go. I want to share with you a couple of initiatives taking place in the United Kingdom (UK) that could generate interest worldwide on the topic of the future of audit:

  • The AuditFutures innovation initiative was set up by the Audit and Assurance Faculty at the Institute of Chartered Accountants in England and Wales (ICAEW) to “ask big questions about the future of the audit profession.” AuditFutures is using a participatory and bottom-up process to develop ideas and practical solutions on changes needed so that audit can best serve society.
  • The UK Financial Reporting Council (FRC) and The Institute of Chartered Accountants of Scotland (ICAS) are commissioning a major project to investigate “what mix of attributes, competencies, professional skills and qualities need to be combined in an audit team in order for it to perform a high quality public interest audit in a modern and complex global environment.”

I am sure we are going to hear more in the near future about these and other efforts to drive the auditing profession down the right path. So I am already looking forward to 2013. I hope you are too!

Keep the conversation going…what path do you think our profession should take to evolve the future of audit?

Post a comment below; or email me directly.

Eric

Conversations about Audit Quality is designed to create an exchange of ideas on global audit quality developments and issues and their impact in Canada.

About the Author

Eric Turner, CPA, CA

Director, Auditing and Assurance Standards, CPA Canada

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