Business is becoming increasingly complex, and audit needs to evolve accordingly, says PwC’s Dion Shango.
This Future of Audit Series interview is proudly brought to you by ACCA.
“The pace at which the world is changing is mind boggling, and the need for change in audit is clear,” says Dion Shango, CEO of PwC Africa. “The question is what form that change should take.”
Dion believes that the starting point should be working to address the audit expectation gap, including educating users of the audit product on its limitations, as well as evolving the audit product to meet shifting user needs.
PwC’s three Ts
In preparing for the future of audit, Dion says there are three key themes on which PwC is focusing: transparency, technology and talent.
“What I mean by transparency and openness is that the more that people see how audit works, how it fits into the financial reporting ecosystem, the better. And we as PwC certainly are committed to being as open and as transparent as what regulation and competition law would permit. We are also committed to expanding audit so that it meets a wider set of stakeholder needs, as opposed to just the traditional shareholder,” Dion explains.
“Just as technology is transforming how our business works, it is also placing new demands on us as auditors. It's transforming the way we audit. And it's enabling the type of step changes in the speed or the nature of auditing that we would have never imagined a couple of years ago.”
When it comes to the issue of talent, Dion says that audits will only ever be as good as the auditors who are doing the audit work on a day-to-day basis. “What that means for us at PwC is that there has to be a huge focus on culture, and values. And we need to continue to invest in making sure that we have specialist skills, that as an organisation we promote the boosting of social mobility, and that we’re making sure that people are given the type of opportunities that will see them grow and develop,” he says. “Most importantly, we need to ensure that there is a good dose of diversity and inclusion within our firms to ensure that we take into account as many perspectives as possible.”
Interestingly, as PwC Southern Africa has grappled with the advent of mandatory audit firm rotation (MAFR) in South Africa, Dion says that despite the cost and disruption involved, one benefit has been the effect on culture at the firm.
“Your typical auditor is not very good at sales,” he says, smiling. “Having to go out and sell yourself and justify why you want to be the new auditor of a particular organisation is daunting and challenging for most of us in this profession. This has been a fantastic opportunity for us to develop the skills of auditors in slightly different ways, and challenge them in different ways. Some people have found it incredibly difficult, but invigorating and refreshing in other ways. I think MAFR has a positive impact on our culture, with people really being a lot more passionate about the brand, about the firm, about what it is that we do, and how we articulate the value and quality that we bring to our clients. The benefit is that auditors are getting much better at telling the story of what it is that we do, how we add value, and why we should continue to see audit as a profession that is necessary within society.”
Shifting understanding of public interest
Whereas traditional definitions of public interest tended to centre on the needs of capital markets and providing reliable financial information that could be used by shareholders, Dion questions whether this definition is still widely accepted and fit for purpose. He says there’s a need to debate whether more should be done to address the need to assess the viability of a company's business model in the future, and not just its historic performance, as recorded in the financial statements.
Furthermore, he says, investors are increasingly looking at non-financial information to assess companies. “There's a question about the extent to which that information requires assurance from an audit – is it something that should be built in?”
The public conception of public interest also increasingly includes issues like sustainability, and social impact, which are not areas traditionally focused on in an audit report. These issues could potentially fall under the purview of statutory audit, rather than just the quality assurance that some companies provide from time to time, Dion notes.
Prioritising education and ethics
Dion acknowledges that no one actor in society possesses all the knowledge, skills, tools and resources to be able to create a successful future of audit alone. “It's quite clear in my mind that we have to constantly and continuously work collaboratively with the academic fraternity, those that are responsible for the early academic training of our future talent, providing us with the skills pipeline that we need,” he says. “When I say academic fraternity, in my personal view, that means going down all the way to school level, and interacting much more frequently with the schools, with our stakeholders, such as the Department of Education, making sure that the way in which the syllabus is designed, and taught is in a way that will equip our kids with the type of skills that they will need to add value in a fast-changing business world and make sure that they are fit for the future in terms of their knowledge and skills.”
Dion believes that society as a whole must “double down” on ethics and integrity – from the way honesty and integrity are taught from a young age at home. This directly impacts on the quality of people entering the audit profession. “It’s important that we go back to basics in terms of how we raise our children, and teach them about the fundamentals of what is right or wrong,” he says. “This is incredibly important and should not be underplayed.”
In a similar vein, and pointing back to the theme of transparency, Dion says that just as auditors should debate their role in providing assurance over non-financial measures, including ESG, they also need to report on their own ESG measures. In this regard, PwC announced in 2020 that it plans to reach net zero carbon emissions by 2030. This will affect how the firm does business, from minimising travel to relooking its real estate, but with more than 280 000 employees worldwide, Dion says the firm does not underestimate its social impact.
An exciting future
While many discussions around the future of audit focus on challenges on the horizon, Dion flags that it’s important not to lose sight of the opportunities. “There is a fantastic opportunity that should not be missed by the auditing profession to reposition itself, and to once again reassert why it has been such a critical pillar of society for more than 100 years,” he says. “Yes, the profession has gone through challenges from time to time and this is not the first time it will have to evolve and adapt to the changing world. I have no doubt that it will once again rise to the occasion, through focusing on the right things, embracing technology, and always putting quality as our number one priority. It’s exciting times, the way that I see it.”