Hardly a week goes by without a new article discussing the rising number of flawed audits. A recent Public Company Accounting Oversight Board (PCAOB) review found deficiencies in 30% of US audits carried out by global networks, up from 21% the prior year. Just a week later, on the other side of the globe, the Australian regulator noted similar concerns.
So are audits getting worse? There’s no denying there are several challenges:
- Increasing complexity: Large corporates are becoming increasingly complex, making it difficult for auditors to thoroughly assess their operations.
- Staffing issues: A auditor shortage, fuelled by long hours, inadequate training, and poor management is placing greater pressure on doing more with less.
- Market pressures: Auditors are under significant pressure to cut costs and save time, impacting the resources available.
- Rising expectations: Auditing has never been about verifying every single number or unearthing malicious actors, but rather ensuring a reasonable level of independent evaluation. Yet, with each corporate collapse, the standards keep getting higher.
While some of this may be a matter of perception, as similar issues have risen in prior decades, their persistence doesn’t mean they can’t be addressed. We would highlight three primary areas that could drive improvement:
- New ways of working: Tradition doesn’t always equate to value. Partners must embrace change and be open to different ways of working. This could involve increased flexibility, greater training and mentorship, and alternative career paths.
- Dedicated change management: Auditing is complex and needs structure. Unfortunately, most accounting firms make change a ‘side-of-desk’ job for a low-earning-partner rather than assigning a dedicated leader to drive change. Ironically, many accounting firms have consulting arms that are experts in this.
- Adoption of new tools: Auditors need to swiftly adopt tools that can significantly enhance efficiency and free up time to address more complex quality issues. Two great examples are Suralink and DataSnipper (along with Validis!).
Einstein apocryphally said ‘Insanity is doing the same thing over and over again and expecting different results’. Accountants must alter their behaviours and embrace new ways of working, dedicate resources to change management and adopt new tools.
Most accountants are already on this transformative journey, but change can take time to master. However, similar to an actual audit, the first and easiest place to start is getting the financial data. Validis allows customers to upload their ERP data in seconds. This not only improves the customer experience but empowers auditors to spend more time working with the data rather than collecting it.