By Mike Martin

 

Over the next decade, audit teams will feature more diverse skill sets, become increasingly technology proficient, and adapt to cover new market demands and regulations. Those were the key predictions of two audit experts featured in an Accounting Today webinar titled, The Audit in 10 Years.

 

Audit teams of the future will look nothing like they do today, said Demetrios Frangistakos, leader of analytics and emerging methods with BDO USA. While teams have traditionally consisted of generalists who handled everything, the profession has seen an evolution over the last several years that will accelerate throughout the next decade. 

 

There will continue to be demand for subject matter experts in areas such as corporate finance and tax, Frangistakos noted. But general auditors will also need to have different skill sets as technology becomes increasingly important in audits. 

 

For example, audit teams will need to have expertise in project management, data analytics, data modeling and scripting. 

 

“Those are not traditional auditors,” Frangistakos said. “But they’re going to be part of the assurance practice because they’ll be building things for the folks who will be executing.”

 

The composition of the auditing team hasn’t changed much over the years, noted John Farrell, chief strategy and transformation officer for audit at KPMG. Generally, it has resembled a pyramid with a partner on top, senior managers below, and staff on the bottom. That’s changing now that teams require different skills. 

 

“It’s more diverse,” he said. “There are more roles on the team that are unique specializations. It’s going to force us to get away from that pyramid.” 

 

Auditing Automation Will Accelerate 

 

The big driver behind most of the changes in auditing over the next decade, Farrell and Frangistakos agreed, will be technology. Data sets are already playing an important role in audit, one that will increase significantly in the next few years, resulting in more automation of routine audit tasks. 

 

“In 10 years there will be significant changes in eliminating routine effort that was done by auditors,” Frangistakos said. “It’s going to look dramatically different, where there’s a focus on things that require more judgment, analysis trends and predictive areas.”

 

He added that technology shouldn’t be seen as a threat to auditors, but as a tool that enhances the audit process. 

 

“The question always arises whether this eliminates the need for audit,” he noted. “I think it’s quite the opposite. You’re just going to need people with different skill sets who are going to be doing these audits.” 

 

A More Virtual Audit World

 

Technology isn’t just impacting the analytical aspect of an auditor’s role. It’s also changing how they work with clients. Innovations supporting remote work, such as smart glasses that clients can wear to display live video of inventory to auditors, have existed for years. Until the COVID-19 pandemic hit, however, the audit industry hadn’t adopted much of it because, Farrell said, “It’s hard to change behavior. But in the pandemic, we had no choice but to change because we couldn’t physically go to clients.”  

 

During the pandemic, KPMG created virtual audit rooms for its teams. Auditors are accustomed to an apprentice model, where newer auditors are able to learn from the more experienced people they work with. 

 

“We lost that through the pandemic because we weren’t physically in an audit room doing an audit together,” Farrell said. The virtual audit room allowed teams to work together with audio and video, asking and answering questions just as they would in a physical audit room. 

 

It also facilitated conversations with clients. “As simple as it sounds, it really helped us adapt to the situation,” Farrell noted.

 

As pandemic restrictions ease, physical audits are beginning to re-emerge. But not all clients are rushing to return to a physical audit room model. 

 

Only time will tell how popular the virtual audit will become, Farrell said. “Some clients are encouraging us to come in and others are not,” he said. “I’m looking forward to seeing how that evolves.”

 

New Employees Driving Change

 

The need to attract new employees is also driving technology adoption, both panelists noted. 

 

“People coming into the profession today, their whole world is around using their phone,” Farrell said. “They jump onto a computer and they are remarkably unimpressed with what they see in client and firm systems. There’s a huge demand from that constituency because our people in all our firms are our most important asset. If we don’t start to think and serve and cater to what they’re expecting, we won’t have them.”

 

BDO USA surveys its workforce to find out what technologies employees are using. The level of automation adoption is much higher among employees who have graduated within the past five years, Frangistakos said. 

 

“There is a different way people work and digest information and have an ability to progress and how they execute. The whole audit profession and experience has to change for the new workforce that’s coming out.” 

 

Non-Material Factors Will Matter

 

Both Farrell and Frangiastakos believe there will be growth over the next decade in non-material factors that auditors are expected to cover. Environment, Social and Governance (ESG) will be a big focus. Stakeholders will want to understand the overall sustainability of a business and not just its financial history. Audits on areas such as racial equity, climate change and cybersecurity will become more common.

 

Auditors will also be expected to audit technologies such as digital ledgers, systems and controls to ensure the data that’s being generated is a true representation of an organization’s operations. Both panelists believe the amount of work generated by non-financial information could be as much as 50 percent of an audit. 

 

“It’s hard to tell how high it might be, but 30 to 50 percent would not surprise me,” Frangiatakos said. “I think regulators will push firms to provide more information and to analyze it differently.”

 

For auditors looking to keep up with the changes transforming the industry, Caseware IDEA Data Analysis Software is a comprehensive, powerful and easy-to-use data analysis solution designed by audit experts. Discover what it can do for your organization today.

 

Mike Martin is a Content Marketing Writer at Caseware. He is a former IT magazine editor with extensive experience researching and writing about enterprise technologies. At Caseware, Mike reports on today’s top issues affecting auditors and accountants and how advanced technologies are helping them drive better results.