Andrew Gambier, Nick Jeffrey  | 

Last month, the Association of Chartered Certified Accountants (ACCA) and Grant Thornton published The Future of Audit. This short report brings together the output from seven roundtable discussions on the future of audit held in China, the EU, Singapore, South Africa, the UAE, the UK and Ukraine. The locations covered a broad spread of geographical regions, business environments, and cultures. The nature of the roundtable debates, which varied in size from small to larger groups, was surprising, both in terms of where participants agreed and where they disagreed.

The main finding was the discovery of two opposing views of audit. In developed economies, the prevailing view is that audit needs to evolve. For many years, the prevailing model—with the notable exception of the US—was for all companies, whether privately owned or listed, to be audited. Over the last twenty years or so, the trend has been to exempt smaller, privately owned companies from the requirement to be audited and to increase the number of companies covered by this exemption. For listed companies, stakeholders have called for the audit to give a more meaningful set of insights beyond the “pass/fail” provided within the auditor’s report.

Roundtable participants highlighted three broad issues with the audit report:

  1. It is addressed only to shareholders;
  2. It is issued months after the period-end and mainly covers only historical financial information; and
  3. It is a single, standardized report that doesn’t reflect the needs of particular users.

These pressures are behind the development by the International Auditing and Assurance Standards Board® (IAASB®) of ISA™ 701,[1] which requires the auditor to disclose key audit matters within the audit report (see the “The New Auditor’s Report").

The roundtables revealed a very different picture in developing economies. In these countries, audit is a comparatively recent development. These countries see the financial statement audit as an essential part of enhancing investor confidence in business. They are keen to help their burgeoning audit professions develop further so that audits can be conducted using local talent to a consistently high quality. So far, there is comparatively little interest in evolving the audit: what matters most is getting the standard, historical financial statement audit right.

Participants discussed how the audit might develop to provide more useful information to users. There was a sense of frustration at the feeling that auditors have valuable business insights but do not share them with users. However, it was also recognized that it’s important for auditors to be seen as independent. And in the past, auditor liability and payment for new services have been barriers to innovation. Regulation and legislation may be the main drivers for change. For example, in the European Union, legislators are requiring auditors to do more beyond the traditional scope of the historical financial statement audit, while simultaneously imposing greater restrictions on non-audit services and the fees auditors can earn from them.

The roundtable participants were asked for their views on the skills the auditor of the future will need. Participants generally agreed auditors will need better communication skills and commercial acumen, and audit teams will need to access a wider range of technical abilities, including perhaps engineering, psychology, and statistics. The digital age also presents challenges, with investors and businesses looking to auditors to make use of the latest technologies, including data analytics, to speed up the audit process, produce innovative insights, and improve audit quality.

The report concludes with some observations about the way forward: in particular, while innovations in developed economies are important there, it should not be presumed that they will be equally applicable everywhere. Developing countries should be given time to build up their audit infrastructure. In addition, the report identifies the advantages of a stable body of standards. Improving audit quality is important and, sometimes, may be best achieved by allowing auditors more time to understand the existing standards rather than continually updating them. And regulators should recognize that there’s a balance between audit quality, consistent application, and innovation. Gains in audit quality can arise from auditor innovation, as well as from regulatory intervention.

ACCA and Grant Thornton are planning future events around The Future of Audit, including a launch event in Brussels in November and possibly additional roundtables. The authors, Andrew Gambier and Nick Jeffrey, can be reached at andrew.gambier@accaglobal.com and nick.jeffrey@gti.gt.com.

[1] International Standard on Auditing 701, Communicating Key Audit Matters in the Independent Auditor’s Report (Effective for audits of financial statements for periods on or after December 15, 2016)

Andrew Gambier
Andrew Gambier is Head of Audit and Assurance within the global Professional Insights team of ACCA. He leads ACCA's policy on audit and assurance matters, including thought leadership publications and responses to consultations.
Mr. Gambier is the author of Banishing Bias: Audit, Objectivity and the Value of Professional Scepticism, which uses learning from psychology to propose how auditors, standard setters, audit regulators and other stakeholders can support better professional scepticism.
In addition to his IAASB role, Mr. Gambier provides technical support to Zbigniew Libera on Accountancy Europe's Audit and Assurance Policy Group. He represents ACCA on Accountancy Europe's IAASB and US Public Company Accounting Oversight Board sub-committees.
Mr. Gambier trained as an auditor with KPMG and has ten years' worth of experience of auditing listed companies in both the UK and US. Heis a Fellow of the Institute of Chartered Accountants in England and Wales and a graduate of Clare College, Cambridge.
Nick Jeffrey

Director, Public Policy, Grant Thornton

Nick Jeffrey leads the public policy team, covering issues facing member firm clients, the capital markets, the business environment, and the profession. He works with investors, regulators, public and private sector bodies, and Grant Thornton member firms. He represents Grant Thornton in external settings and in the press, speaking on topics such as the future of the profession; Europe and the UK; and EU audit reform. Nick trained as an auditor culminating in three years in the Grant Thornton UK London office working with public and large private companies. Prior to joining Grant Thornton International Ltd he spent nine years in Grant Thornton UK’s national technical department, specialising in auditing, financial reporting and other issues facing audit teams and public companies.