Audit will play an expanded role in fraud identification and sustainability reporting, says EY Africa CEO.
This Future of Audit Series interview is proudly brought to you by ACCA.
Ajen Sita, CEO of EY Africa, believes that digitisation is clearly a significant business trend shaping the corporate landscape globally, and that as companies automate their businesses, both the approach and the nature of the audit product will have to evolve.
“Instead of looking at the traditional approach of sample testing, we are now able to understand whole systems and whole populations of data, which means data is going to become a critical part of the future of audit,” he says.
Ajen has spent his entire career at EY (apart from working for a clothing store during his holidays while studying) and has certainly had the opportunity to consider the future of audit. In addition to his current role, he is part of the EY EMEIA Board, Global Emerging Markets Committee and Global Accounts Committee, and previously he led EY Africa Assurance services. Ajen is chairman of the Thuthuka Education Upliftment Fund, which drives the race and gender transformation of the accounting profession in South Africa.
“The audit product itself will need to evolve too, to deal with two areas that it hasn't addressed historically,” he says. “The first is the expectation gap around fraud. We are seeing poor economic conditions around the world and with the resulting pressure, there is a rise in corporate fraud. Auditors need to play an expanded role in identifying and reporting on this fraud.”
He also believes that the focus on long-term value reporting and on climate and sustainability will become critical. “One of the many lessons coming out of the last number of years, and the pandemic in particular, is that we've got to pay more attention to the environment, whether it comes to energy security, food security or just the wellbeing of the population as a whole,” he says. “Companies will only attract capital if they are progressive in their environmental response – and will have to report to stakeholders about what they're doing. Naturally, there will be an expectation that auditors will provide assurance around those sustainability and climate reports.”
However, before audit can begin to play a bigger role in this regard, Ajen believes significant work needs to be done to understand the root causes of the large-scale corporate fraud and company collapses that have dented trust in the profession, and to rebuild that trust.
“In a globally connected and digitally enabled world where transactions are happening in real time, the glue that holds it all together is trust,” he says. “The world is calling for greater levels of trust and transparency because we're having to transact and interact in a digital way. Consequently, audit will continue to be relevant now and into the future, but its role will evolve to play a broader role in trust in society – going beyond just trust in financial statements, to new levels of trust in dealing with all sorts of interactions, from online purchasing to banking and government liaison.”
Audit in Africa
When it comes to audit within Africa, Ajen says there are both challenges and opportunities. “African economies today are strongly connected into the global community. In fact, it is well reported that intra-Africa trade is less than 15 percent of all trade and that most of our trade is with other markets of the world,” he says. “That is important because the factors that are playing out in the rest of the world are also playing out in Africa.”
However, he says there’s no denying that Africa continues to suffer significant skill shortages, not just of suitably qualified chartered accountants, but also of technology professionals. “I believe that addressing this critical skill shortage is fundamental to a sustainable and viable profession and underlying economies in the various countries on the continent. We have a strong opportunity too, as Africa houses the largest percentage of young people of the world, and so we should be focusing on investing in the education of our young people and building the future skills they will need. The world will need it. Given the aging populations of the mature markets, for their skills requirements in the next 10, 15 years, they will come to recruit from Africa, and we must be ready, not only for our own needs but for the world at large.”
Working to create a bright future for audit
According to Ajen, the market opportunity today and into the future for audit continues to be strong. “It is therefore important that as firms, we evolve that product to be responsive to the future needs of investors and broader sets of stakeholders. Those evolutions include increasing investment in digitisation, greater levels of diversity of skills that are embedded in the core audit product from accountants to engineers, to technology people, and including climate change and sustainability skills into the core audit product.”
The audit business remains EY’s single largest business globally. Over the last three years, the company has invested in excess of a billion dollars in new technologies and methodologies to modernise its audit product. “Today, our audit teams are globally connected in cloud-based auditing tools and have shifted the balance of audit work from physical testing of samples to the digital world of a hundred percent population,” says Ajen. “The firm has taken active steps to build strong pipelines of future recruits through programmes that are conducted at a school level to create an interest in the profession through bursaries, mentorships and even lecturing at universities to inspire future generations of chartered accountants, as well as technology skills.”
He emphasises the need for collaboration on this front. “We realised this is something we can't do on our own and we work in partnership with industry bodies, such as SAICA and their Thuthuka programme to transform the profession, and also ensure that we are representing the demographics of the market in which we operate.”
He believes that it is the responsibility of all stakeholders – the profession, the regulators and other parties in the value chain – to create a positive future for audit. This should include creating the conditions to attract and retain talent in the profession, ensuring that the audit product is evolved to meet changing market demands, and developing a stronger ecosystem of auditors, boards, regulators and others charged with governance to ensure trust in the capital markets system.