Halloween is over. Autumn is kicking into full gear. And now that the scary stuff is over, it’s time to talk about … audits.
Which is important, because the future of audit is … uncertain, to say the least.
Luckily, we had an opportunity to talk to Mark Miklosovic, the customer proposition strategy lead for tax professionals at Thomson Reuters, who spends much of his time thinking critically about the future of this profession.
We talk about where audit has been, where it is now, where it is going — and most importantly, what the future of this profession looks like. Given the pace of change today, it’s a crucial conversation to be having, and to be able to dig deep into the brain of someone who has a passion for this stuff like Mark does is a real treat.
In this conversation, we cover:
- How the role of the auditor is likely to change moving forward.
- Why non-CPAs might start getting involved with the audit process.
- What’s happening at the university level.
- How auditing standards will have to change.
- The skills future leaders will need in this profession.
Listen to our conversation here.
The uncertain future: Audit dead in a decade?
About a year ago, Accounting Today published an article with what may seem like an alarmist title: “Audit dead in a decade?”
In the article, Ranica Arrowsmith reports on a roundtable at New York University where panelist David Yermack — a legal, economics, and finance expert and the Albert Fingerhut Professor of Finance and Business Transformation at NYU’s Stern School of Business — ominously said the audit profession may be dead within a decade. His reasoning basically came down to A.I. and blockchain, saying, “The distributed ledger reduces the need for audit by 97 percent.”
If you are an auditor, that’s going to get your attention. Doomsday predictions like that certainly get the attention of people at the highest levels of the profession. People like Mervyn King, chair of the International Integrated Reporting Council.
“The accountancy profession, and the role of audit, have responded to an increasing pace of change in our society, economy and capital markets,” King wrote. “The global economy is changing at an accelerating pace with new technology challenging traditional business models and an increasing concentration of economic power and wealth in the hands of very large corporations. Alongside this, the nature of value has evolved into a more multi-dimensional concept, including intangibles, societal and environmental factors as well as the traditional financial resources. And the audit firms themselves have been the subject of consolidation, meaning that in most markets globally 80 percent of the audits are conducted by the Big Four firms.
“This evolution — to the economy, nature of value and the profession itself — has brought with it changed expectations, and our book explains how the audit profession, regulators and others should make changes now to meet those expectations,” King continued. “The risk to the profession is nothing less than extinction, largely due to the unlimited liability regime and concentration in the audit market. This is a matter of public interest because a failure of one firm could lead to a significant loss of confidence and, therefore, value in the capital markets.”
Then there’s Susan Coffey, executive vice president of public practice for the American Institute of CPAs, who also recently wrote a piece about the future of audit in a world characterized by rapid change.
“Automation and the digitization of business information are now reshaping the finance function, altering the way we, our clients and our employers approach our work,” Coffey wrote. “The pace of this change is unprecedented: McKinsey Global Institute estimates that 49 percent of work activities could be automated right now using current technology. Big Four firm Deloitte, meanwhile, projects robotics could automate 40 percent of basic accounting work by 2020. For some, it’s not a big leap to envision an audit of the future that’s wholly automated, untouched and unsupervised by human hands.”
But Coffey doesn’t subscribe to this view. Instead, she thinks that “technological advancements give us tools to continue to improve the efficiency and effectiveness of audits in an increasingly complex business environment, but there is still a need for the professional evaluation, judgment and skepticism that auditors bring to the task.”
So there are a lot of opinions, and the future is still uncertain. Mark Miklosovic’s insight provides a much-appreciated clarity to the path that we can take to ensure we’re prepared for whatever future may come.
- Learn more at tax.thomsonreuters.com .
- Follow Mark on LinkedIn.
- Accounting Today: “Where is the audit profession going?”
- Accounting Today: “Audit dead in a decade?”
- Accounting Today: “The future of audit: Looking ahead in a time of rapid change”