CEO's Message

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The possibilities and promise of technological innovation for the audit is at the top of the agenda for practitioners, regulators and investors.  

It’s interesting to consider these advances in light of what auditors have wrangled with for some time – the expectations gap between what the public expects from them, and what they are actually mandated to do. The public expects auditors to detect fraud, better signal material uncertainties associated with a company’s longer-term solvency and be more involved in assessing critical data reported outside the financial statements, including non-GAAP information.  

While audits are certainly an essential part of a robust warning system meant to protect the investing public, they cannot singlehandedly stop a company from failing. This ‘expectations gap’ has been tough to narrow and has the potential to erode the public’s trust in the audit profession and in the reliability of public company audits.  We’ve already seen cracks internationally.  For example, after recent corporate failures the UK government has performed comprehensive reviews of the auditing profession and its regulator and has proposed a number of reforms.    
 
Can technology help close the gap? CPAB is looking closely at how the audit profession can leverage innovations like AI and data analytics to deliver higher quality audits. For instance, we conducted a review across audit firms to help us better understand the prevalence of data analytics used in audits and associated improvements and challenges. While we found it’s still early days, partly due to difficulties in extracting data from sophisticated ERP systems, there is little doubt these challenges will be resolved and data analytics and other tools including machine learning and AI will be widely adopted. 
   
As a result, audits will become more targeted and efficient. Less judgmental tasks will be automated, making the profession more attractive to the best and brightest. Auditors will be able to ask better questions to management and provide more meaningful insights to company directors. Questions like: “Can you tell me why sales have increased?” will be replaced by: "My analytics tell me that these transactions are not consistent with my expectations, can you tell me why?". 

I believe technology will be a significant enabler of improved audit quality; advancements will increase the audit profession’s capacity to deliver more of what the public expects. 


Carol Paradine, CPA, CA
CEO
CPAB


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