- The traditional audit will need to evolve to include more robust assessment of future viability, fraud and misconduct
- Technology can facilitate wider and richer audit assessments, but implementation may be delayed due to regulations
- The future of the audit profession is bright, but not without its challenges
With great expectations comes great pressure
The Brydon Review is an official response to the public demand for audit to expand in scope beyond traditional financial reporting. Walker and Ghandar agree there has been a longstanding expectation that audits report on future viability, fraud and misconduct, and now the landscape is shifting to deliver more robust assessments of these areas.
"The expectation is that audits assess the risks and provide insights on how to manage them. It's fair to say the public want more from auditors," Ghandar says.
Walker argues that growing expectations are placing increased pressure on audit practices, and forcing them to change the way they operate. As a result, this is impacting audit practices of all sizes.
"More and more we are seeing smaller practices exit the audit market, simply because they cannot keep up to speed with the increasing regulatory requirements and standards. On the other hand, large firms are becoming more selective about which entities they audit. Large entities who are deemed high risk may find it increasingly difficult to hire an auditor," Walker says.
Technology: Opportunities, risks and challenges
While these growing expectations can be difficult to meet, technological innovation is providing more opportunities for auditors to do so. Ghandar believes technology has the power to enhance the quality of risk assessment in auditing.
"There are technologies that allow you to cast a much wider net to unearth and understand risks at a much deeper level. Your risk coverage can increase dramatically. But it's a double-edged sword, as you risk becoming overwhelmed by the sheer volume of data," Ghandar says.
Walker sees the opportunity access to big data presents for large firms to develop competitive advantages.
"Large firms are already using big data analytics to enhance audit scope and quality, and solve traditional challenges of information management. Smaller audit practices may struggle to compete in this area, but we are seeing more affordable technologies entering the market," Walker says.
Auditors also need to be prepared for a delay in the implementation of new technologies due to the challenges of updating audit standards. Ghandar notes standards and regulations will struggle to keep up with technological innovations, limiting the pace of uptake in the audit profession as a result.
"There are about 1100 pages of audit standards, down to an incredible level of detail. You can imagine these standards taking years to be updated, and technology is moving at a much faster pace. We need to work with standard-setters to speed up this process and unlock the potential of various technologies," Ghandar says.
"The expectation is that audits assess the risks and provide insights on how to manage them. It's fair to say the public want more from auditors."
What does the future of audit hold?
As the profession continues to evolve, both Walker and Ghandar see the scope of audits expanding to meet public expectations. Enabled by new technology, future audits will not only provide a wider range of assessments, but also richer insights, solutions and recommendations.
"In the long-term, you could see an auditor releasing a report that not only signs off on a company's financials, but also delivers insights on risk, an evaluation of management and operations, and their prospects more holistically. Getting to this stage will take time, but it's very exciting," Ghandar says.
Walker also warns of some of the issues that may arise, particularly in regard to the risks technology could pose to junior auditors. He claims tasks that are traditionally the responsibility of junior auditors will be increasingly automated and therefore remove their opportunity to develop valuable experience.
"The ability to exercise professional judgement will always be needed. There's a danger future junior auditors will never undertake the tasks necessary to develop a thorough understanding required to make sound professional judgements," Walker says.
However, Walker and Ghandar agree this does not signal the end for auditors, conversely, a chance for them to adapt with the industry and gain new opportunities.
"There's never been a greater demand for auditors and the independent assurance and confidence they provide. The challenge is expanding the traditional audit scope to deliver against public expectations, but I think it's a very positive future," Walker says.