The future of audit: market view report by Mazars Group highlights need for audit soft skills.
This Future of Audit Series interview is proudly brought to you by ACCA.
Adiebah Moruck, partner, quality & risk management at Mazars Group, says the firm’s 2020 report, The future of audit: market view; Myths, realities and ways forward, highlights some interesting findings from a quantitative survey of 501 respondents in strategic positions (CFOs, CEOs, or members of audit committees), at organisations headquartered across 12 countries.
“What is quite surprising from the recent survey is the percentage of clients open to rotating their auditors,” she says (26 percent had rotated or seriously considered rotating auditors, even where it was not a requirement to do so).
Another surprising finding she emphasises is that respondents are not only looking for an auditor with strong technical skills, but placed significant emphasis on the softer skills, such as listening, proactivity and creativity.
“There has also been a shift within the profession, with clients expecting their auditors to add value and bring valuable insights to the table,” she says. “The survey also showed an overwhelming number of respondents wanting auditors to broaden their range of services (96 percent of respondents). In future, auditors will be required to provide the users of the financial statements with additional information and increase shareholder value, and also value-added services to their clients. Audit firms will no longer only be providing audit services but will be required to offer a range of services and broaden their skills sets in order to service their clients better.”
Regulation and standard-setting
Significant corporate failures have seen the audit landscape change dramatically over the past few years, with regulators around the world incorporating more stringent requirements for auditors, focusing on issues related to the auditors’ independence and enhancing audit quality through various initiatives.
“Leaders will need to continue promoting ethical values, focusing on independence, integrity and professional scepticism,” says Adiebah. “Furthermore, changes to existing standards will continue to accelerate the pressure on auditors to not only provide high quality audits, but prove to stakeholders that they have performed an audit that can be relied upon.”
For example, she says, the IRBA has undertaken various initiatives to enhance the quality of audit and increase transparency to stakeholders. “One such example is the consultation paper that was released that discussed enhanced auditor reporting. Should these changes be implemented in South Africa, the audit report will no longer just be a document included in the financial statements, but it will provide users with valuable insights about the audit,” she explains. “We will continue to see regulators around the world embarking on various initiatives to enhance audit quality in order to increase investor confidence and rebuild the trust of investors and external stakeholders.”
The International Auditing and Assurance Standards Board (IAASB) International Standard on Quality Management 1 (ISQM 1) is set to become mandatory for all firms on 15 December 15 2022 and Adiebah suggests this could also play an important role in the enhancement of audit quality globally.
“One of the major changes in the profession is the implementation of the ISQM standards. These standards will require audit firms to move from a policy-based approach to a risk-based approach,” she says. “What does this mean for audit firms? In applying a risk-based approach, audit firms will have to carefully assess the level of risks within the organisation in order to adequately address the risk for that particular firm. Firms will need to be brutally honest about the risks they face in order to establish quality objectives and design and implement policies to meet these objectives.”
She believes the implementation of the new quality management standards presents an opportunity for firms to take a holistic approach to identify weaknesses and possible blind spots in their current processes and systems of quality control, and to develop appropriate responses to mitigate those risks and provide their auditors with the best possible tools to perform quality audits of the highest standard.
Evolving profession requires new skills and ways of working
“Covid-19 has brought about unprecedented challenges to the profession, but the past 18 months have been transformational for the audit profession with auditors demonstrating adaptability and resilience due to the challenges posed by the pandemic,” Adiebah says. “Although the concept of remote working is not new to auditors, the pandemic created an opportunity to test its viability and the impact it will have on audit quality, leadership and culture. The rapid shift to flexible working has created challenges that audit firms will need to address, but the sudden shift required as a result of Covid-19 has made firms more open to different ways of working.
“The increased flexibility brings the benefit of firms focusing on productivity and output as opposed to the number of hours being spent at a client’s premises. However, firms will need to find the right balance between remote and onsite working, to ensure staff get the required exposure and on-the-job training while still maintaining the culture within their organisation and building and maintaining the professional relationships with their clients.”
Digital transformation has also surged, and Adiebah says that in future, technology will be used more extensively to enhance audit quality and increase efficiencies during the audit process, which will mean auditors will require a different skills set in order to remain relevant.
“Auditors of the future will not only require business backgrounds, but also a deep understanding of technology and how it can assist them in providing value added services to our clients. Complex business models will also require audit professionals with a more diverse skills set and specialist expertise,” she says.
An increased focus on sustainability reporting and reporting on non-financial information can provide stakeholders with a comprehensive overview of the business operations and its strategies. This creates an opportunity for auditors to provide assurance and enhance the credibility of these reports.
“Integrated reporting has become an effective way to communicate a company’s strategy and the importance of environmental, social and governance (ESG) performance has increased in recent years,” says Adiebah. “Reporting no longer only focuses on the financial performance of businesses and including a wide range of information allows reporting to cater to the different needs of various stakeholders.
“The inclusion of non-financial information is absolutely necessary for companies to gain the trust of their shareholders and investors about whether they are able to maintain sustainable growth in response to the ever changing environment. Studies have shown environmental factors to be the one of the most significant factors influencing investors who are focusing on material issues related to climate change and human wellbeing. But investors should not underestimate the importance of social engagement and good corporate governance and the impact they can have on the sustainability of a business.”
