Brian Hunt, FCPA, FCA, ICD.D, the CEO of the
Canadian Public Accountability Board, shares
his thoughts on the future of auditing at the
Accounting Educators’ Symposium on May 21, 2015.
services, could prompt a firm to decide that
continuing to deliver public company audits,
with decreasing margins and regulation, is not
worth the risk.
This trend should be considered in the broader context of how the audit function in general
is being perceived from a relevance and value
perspective. What is the relevance of the audit?
Boards of directors, audit committees, and investors likely value audits from an assurance
perspective, but is there additional value audits
can create for investors and other stakeholders? Is the value keeping pace with our global,
technology-driven, real-time capital markets?
There is also the risk of audits falling into
what I call the “Commodity Trap.” Currently,
it’s difficult for audit committees to differentiate between audit firms based on quality,
and there is little transparency to the audit
committee regarding quality audit work.
Audit committees—which often perceive the
main value of the audit process as a “reliance
on an expert” defence should an issue arise—
often assume that all audit firms comply with
general standards of competence and deliver
good work. The unfortunate economic reality
of this thinking is that when customers can’t
differentiate between suppliers on the basis
of quality, price usually drives purchasing
decisions. In my view, the Commodity Trap is
one of the biggest obstacles to advancing the
relevance and economic value of the audit.
One way to move beyond the Commodity
Trap is to foster enhancements and developments not included in generally accepted
accounting standards, with the aim of providing better, faster, and more efficient audits.
To do that, we must look to innovation.
Many of us in the profession believe the use
of emerging technologies and practices—for
example, mining large amounts of data and
developing sophisticated data analytics techniques—may increase the audit’s value to stakeholders. These technologies and practices could
provide deeper insights into—and foresight
on—the organization’s operations. They also
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