Accounting

Developing Tomorrow's Auditor

By Kathy Shoztic, Will Bible, Erica Nelson and Professor Sarah Stein

Breakthrough technologies and other audit innovations may reduce the need for manual data collection and reconciliation dramatically, enabling accountants and auditors to apply more of their time and expertise to areas that make a real and meaningful difference.
 
This new kind of audit will require a new kind of auditor – not just someone with deep accounting knowledge who is willing to work hard, but someone who can also harness the latest technologies, understand financial reporting holistically, and communicate effectively with executives and audit committees.
 
Although assurance and professional skepticism are the heart of an audit, today’s investing public expect much more. In particular, subject to Section 404 of the Sarbanes-Oxley Act of 2002, they expect auditors to provide an objective opinion on the effectiveness of a public company’s internal control over financial reporting.
 
Meanwhile, sophisticated data analytics built on greater access to big data is enabling auditors to deliver valuable and deeper insights about the business. In the future, we expect to see audit firms invest significantly in technology to deliver audits that are highly automated and conducted more rapidly.  These audits may be enabled by the ability to test complete data sets, not just samples – leveraging a vast array of internal and external data sources to generate insights that weren’t possible before.
 
DNA of Tomorrow’s Auditor
Although there will always be a need for deep knowledge and experience in traditional areas such as financial accounting and reporting, managerial accounting, taxation, Generally Accepted Accounting Principles and professional standards, these core capabilities are just the beginning of what an auditor likely needs. In addition, auditors may demonstrate deep industry expertise and experience, understand business strategy and context, and possess the ability to think critically about the financial reporting environment.
 
Moreover, future auditors will likely need strong technology skills and experience in key areas such as data analytics and visualization. They may not have to be technology experts or computer programmers; however, they will likely need highly practical knowledge in using technology to manage and analyze data.  In particular, effective auditors should know how to leverage emerging technologies to solve messy problems.  Essential technology skills may include:
 
  • Mining structured and unstructured data from a wide range of sources.
  • Identifying potential data risks and problems (including data security and integrity).
  • Knowing how to work with relational and non-relational databases.
  • Applying and interpreting statistical methods and advanced analytics to turn raw data into useful insights.
  • Using visualization to present complex data analysis in a narrative.
 
Developing this new kind of auditor requires significant time and effort, with audit firms and academia joining forces to identify what’s needed, and developing curricula and training programs that combine leading-edge instruction with practical, hands-on experience. The good news is the future technology-driven approach to audit is a natural fit with today’s tech-savvy workers, giving them ample opportunities to leverage their existing skills and interests in a way that delivers maximum value and impact.
 
A Gap in Perceptions
A recent survey of accounting academics by Deloitte & Touche LLP and the Deloitte Foundation, a not-for-profit organization that supports education in the U.S., found a significant gap between what respondents in academia believe accounting students are interested in (beyond the traditional accounting curriculum), what schools are teaching, and what skills seem to be in greatest demand by today’s employers.
 
In particular, the survey found a 21 percent gap between employer demand for data science skills (47 percent) and student interest in data science (26 percent). Some of the other non-traditional skills that today’s employers look for include statistics (20 percent), programming (13 percent), and project management (10 percent).
 
Although today’s students are very technology-savvy, 87 percent of survey participants do not believe students are ready to apply their technology skills in a business environment. And 73 percent of survey participants say a separate course in data analytics is not a required part of their accounting curriculum.

For companies looking to help academia improve its data analytics programs, the top two needs identified by the survey are real-world data sets (49 percent) and case studies (40 percent).
 
Bringing Real-World Insight to the Classroom
Real-world audit insights were center stage at this year’s “Robert M. Trueblood Seminars for Professors,” hosted by the Deloitte Foundation and the American Accounting Association at Deloitte University in Westlake, TX. For more than 50 years, the Trueblood Seminars have served the audit profession by helping to teach new developments in auditing and accounting to select educators and thought leaders from around the country.
 
This year’s Trueblood Seminars included a dedicated track on audit innovation, helping professors introduce their students to the latest audit methods and tools – particularly the data and analytics tools that are transforming the audit process and contributing to higher-quality audits. This exposure helps today’s tech-savvy students see they can use the same kinds of cutting-edge technologies at work that they have become accustomed to using in their personal lives. It also helps accounting students view the audit profession as a dynamic and exciting long-term career.
 
In the past, early career auditors often focused on gathering, checking, and reconciling numbers manually. Today, however, aided by investment in new technologies, there is now the ability to devote more emphasis on creative, value-added analysis– activities that early-career auditors are likely to find more interesting and rewarding.
 
Other Ways to Prepare the Next Generation of Auditors
In addition to bringing real-world data and insight into the classroom, there are a number of specific actions that many academic institutions are considering. These include:

Developing a curriculum that provides a foundation for the new skillsets that will be required, such as advanced analytics, programming, data visualization and data manipulation.  This could also include training on the use of tools being developed.  The additional courses that would be necessary could be provided either in the form of a minor degree or worked into undergraduate and graduate curricula. 

Enhancing the current curriculum to provide a more in-depth understanding of business processes and internal controls through case studies, simulations and course supplements. For instance, evaluating information security and data integrity in financial statement relevant systems may be a critical element of study.

Continuing to cultivate a critical thinking mindset.  As the impact of automated technology moves the focus of the audit away from manual tasks, the ability to think critically will become increasingly important at earlier staff levels.  The curriculum may incorporate projects where the answers are ambiguous and require professional judgment.

Creating a forward-thinking outlook. Historically an audit has primarily been hindsight-oriented, whereby the primary procedures have been designed around testing transactions that have already occurred. Investment in new technologies will likely provide the auditor with increased opportunities to develop unique insights. 
 
Attracting the Best and Brightest
Early-career auditors and audit students will likely be the first to embrace the new audit approach and talent model. These folks don’t have much personal investment in the status quo, and have much to gain from doing things in new and better ways.
 
Traditionally, new auditors have spent their early careers doing a lot of heavy lifting and manual processing while learning the valuable skills required to become effective and experienced auditors.  Now, much of the heavy lifting can be done on a continuous basis with automation, enabling young auditors to focus on value-added areas such as data analytics and a deeper understanding of business processes and industry expertise that has a greater immediate impact – while reducing the tedious workload that traditionally occurs at the end of each reporting period when the audit process ramps up.
 
The new technology-driven approach to audit is a natural fit with today’s tech-savvy young workers, enabling them to leverage their existing skills and interests to create enhanced value and impact. Similarly, work innovations are making it possible for talented young people to have their voices heard without having to go through hierarchy and bureaucracy.   They are often critical voices in shaping investment into new technology.  These innovations — including virtual teaming — also provide greater flexibility in how, when and where work gets done, helping young audit professionals achieve the sometimes-elusive goal of work-life fit.
 
Barriers to Change
The need for a new kind of audit talent is clear; however, the changes necessary to develop, attract and harness such talent won’t happen overnight — and could require deliberate effort. One of the biggest barriers is resistance to change, which will likely be encountered at many levels, including clients, investors and auditors themselves. Although there seems to be a widespread feeling that the traditional audit has room to improve, many people also recognize how important and valuable audit is, and they are afraid major changes might expose our capital market system to unacceptable risks.
 
Investors look to the assurance that auditors currently provide and find it valuable, even as they call for improvements. Audit clients are familiar with the level of assurance and scrutiny delivered by existing audits, and might not see the value of changing unless it saves them money or delivers valuable insights for them to consider that they may not get from other sources.  These changes will likely be easier for companies that are also undergoing digital transformation. 
 
A fundamental role of audit in our capital market system is to provide assurance and enhance trust, so it’s entirely appropriate for change to happen slowly and deliberately. However, automation can reduce operational errors in the conduct of an audit and provide a platform for more holistic thinking about financial reporting objectives.  Eventually audit stakeholders may not only accept, but embrace the new kind of audit because it enhances the traditional approach in many ways – both in terms of efficiency and effectiveness.
 
Ready. Set. Go.
The nature of audit is changing, attracting new kinds of talent and creating opportunities for current and future auditors to think more strategically and create greater value for companies, the investing public, and our capital markets.
 
Since the earliest days of public investing, auditors have played a key role in the capital market system by providing reasonable assurance that financial statements are free of material misstatements, helping to build public trust and contributing to investors’ ability to make confident and informed decisions. However, over the past two decades, the role and importance of audits has grown significantly, with audit responsibilities for many public companies in the United States expanding to include an opinion on the effectiveness of a company’s internal control over financial reporting.
 
Now, things are changing even faster, driven by investments in technology innovation and the proliferation of data in all aspects of business and life. Thanks to the emergence of data analytics and big data, and the unique position an auditor holds, auditors today can deliver insights about a business while reducing the focus on performing tedious tasks such as manual data collection and reconciliation.
 
These trends and others are changing fundamentally how audits are done, making the process less manually intensive while improving quality and timeliness. Audits of the future will likely be more insightful, less intrusive, more collaborative and real-time, and auditors of the future will engage with stakeholders in new ways.
 
All of these changes represent an exciting leap forward for the audit profession. However, making them happen won’t be easy. Success will require significant investment and effort on many fronts — including strong collaboration between audit firms and academia. This is an exciting time for audit, and the beginning of a new world for people entering the profession.

Kathy Shoztic is the executive director of the Deloitte Foundation.
William Bible and Erica Nelson are partners in the audit practice of Deloitte & Touche LLP. 
Sarah E. Stein is an assistant professor at Virginia Tech.

 
The Deloitte Foundation, founded in 1928, is a not-for-profit organization that supports education in the U.S. through a variety of initiatives that help develop the talent of the future and their influencers and promote excellence in teaching, research and curriculum innovation. The Foundation sponsors an array of national programs relevant to a variety of professional services, benefitting middle/high school students, undergraduates, graduate students and faculty. For more information, please visit the Deloitte Foundation Web page at www.deloitte.com/us/df