The Ensuring Integrity: The 13th Annual Audit Conference took place in December of 2018. The conference is attended by experts, innovators, leaders, students, and businesses. These stakeholders discuss the challenges being faced by auditors, the opportunities that are present for improving audits, as well as exciting new developments in the industry. The keynote speech in this conference was given by James G. Kaiser, a board member of PCAOB (the Public Company Accounting and Oversight Board). His position gives him a direct macro-level view of auditing.
An increasing focus on audit technology
The keynote speech went through the many issues that auditors deal with on a day to day basis, as well as a discussion of how better feedback mechanisms can help solve problems faster. The keynote speech also focused a lot on information technology. Mr. Kaiser talked about how the PCOAB recognized the important role of information technology in yielding better audit results.
The second goal is to anticipate and respond to emerging technologies and related risks and opportunities. Advancements in technology are continuously affecting how and when financial information is being generated and used.
He also highlighted another problem which many auditors faced – there were innovative new technologies on the horizon but testing them may break a few of the rules which auditors have to follow.
We understand how innovative auditing firms are being and how important it is for the PCAOB to understand the impact of that innovation on the quality of audit services. We do not want to inadvertently impede innovation as we work to accomplish our mission.
This fear, that innovation is being impeded, is not unfounded. Federal Reserve Governor Michelle W. Bowman raised the same point in the context of regulatory change management technology in her address to the ABA Conference for Community Bankers. Mr. Kaiser went into more detail when he was asked about what role he thought technology would play and how his organization was supporting innovation. He answered:
Since the board’s come on, we’ve developed a program to meet with firms to understand where they are in the technology journey, what they’re developing, and how they think it will impact the audit. The key question we ask is: Are the current standards a constraint in your development of technology? I think the consistent answer is that the standards today aren’t a constraint, but that doesn’t mean that, as we move forward, they won’t be. I think that’s something we have to continuously focus on: how do we need to evolve the standards?
This question of evolving standards is something that every industry and institution is now grappling with.
Go in more details and see Why Automated Audit Technology is Important?
The new approach towards audit management technology
Statements like what Mr. Kaiser said are very important because they address a major problem in heavily regulated industries. The regulations, laws, and practices business in heavily regulated industries have to follow are very strict. They are written to ensure that the processes defined are the best practices using the technology currently available in the market. The problem is that they are so detailed that they impede progress by constraining the use of newer technologies.
Since the current laws and regulations were made in the context of the technology that was available a few years ago, they do not properly reflect the innovating GRC solutions and audit management solutions available in the market. These audit management solutions can potentially deliver much better audit results, but they are heavily constrained by current regulations. Instead of being able to fully exploit these technologies, businesses can only go for minor improvements to ensure compliance.
However, as we can see from Ms. Bowman and Mr. Kaiser’s comments, things are changing, and they are changing fast. Audit management technology – among other similar GRC solutions – enable a paradigm shift within the industry. They have the potential to increase the efficiency and productivity at exponential levels while also lowering costs. That Is why regulators and leading bodies that set standards and define practices are now acknowledging the role technology can play and are focusing on creating new rules that better reflect the new era we are entering.
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360factors, Inc. (Austin, TX) helps companies improve business performance by reducing risk and ensuring compliance. Predict360, its flagship software product, vertically integrates regulations and requirements, policies and procedures management, risks and controls, audit management and inspections, and on-line training and qualifications, in a single cloud-based platform based on artificial intelligence.