Is Canada ahead of the curve or falling behind when it comes to the future of audit?

A partnership conceived out of the financial crisis recently held a meeting in London to bring key players together and use their collective power to drive initiatives towards the audit of the future.

A partnership conceived out of the financial crisis recently held a meeting in London to bring key players together and use their collective power to drive initiatives towards the audit of the future.

In December I attended the second assembly hosted by the Institute of Chartered Accountants in England and Wales (ICAEW) in partnership with the World Wildlife Fund (WWF) under their AuditFutures initiative. AuditFutures is exploring how to innovate the audit so that it best serves society and brings together a broad range of participants from all parts of the financial system. “Financial system” in this context is not just about public companies. It also includes, for example, small business, not-for-profit organizations, public sector and quasi-government organizations, and alternative businesses. The reference to “society” brings in concepts such as sustainability, environmental responsibility and natural capital.

As I introduced myself to the participants, a frequent refrain was a high regard for Canadian audit professionals and their strong audit skills, and envy at Canada for having emerged from the financial crisis relatively unscathed. There was a demonstrated willingness to listen to what Canada has to say on the issues.

The objective of the second assembly was to move from a broad vision of the potential future of audit to identifying initiatives that could most contribute now to moving towards that vision. The initiatives had to be ones that the participants could take responsibility for, rather than passing the buck to others to address.

In looking at potential initiatives, the participants worked on four key elements:

  1. Society’s demands and needs of auditors: For example, could the future auditor be the “conscience” of the entity, providing an independent assessment of whether the entity is living up to society’s expectations?
  2. Content and scope of information: For example, could the future auditor provide assurance not just on historical, financial information, but also non-financial, time-sensitive and potentially forward-looking information, and what would this reporting framework look like?
  3. Competencies and behaviours: For example, what are the implications for the recruitment, training and culture of future auditors?
  4. Profession: What professional standards of ethics, performance and reporting would be needed for the audit of the future?

What impressed me most about the discussions was the determination to move from the theoretical to the practical. The initiatives are to be brought to life through various projects known as incubation labs that provide a safe place for prototypes to be developed. I look forward to learning about specific projects as they get underway.

As I left at the end of the assembly, I reflected on the challenges that lie ahead, such as whether audit can really play a vibrant, innovative, role when it is so heavily regulated, and imagined the opportunities – if auditing can be made more meaningful and valued, it might re-energize, and attract more of the brightest minds to, our profession. But I also wondered whether the AuditFutures initiative would easily transport to Canada, or if it would take our own crisis to kick-start a similar initiative here. It seems to be an opportunity for Canada to participate in some way to the future of auditing.

Keep the conversation going…do you think that now is the time to look at the future of audit? If so, how should this be done?

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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