Audits of publicly-traded companies should move beyond assuring the validity of financial statements and noting risk factors, and take into account insights derived by data analytics, artificial intelligence, and other advanced technologies, according to Deloitte’s “Audit of the Future” survey of 150 financial statement users, 50 audit committee members, and 50 financial statement preparers.
While more than two-thirds of all of the respondents said that the fundamental task of audits is to provide assurance that financial statements are free of material misstatements and companies’ systems of internal controls over financial reporting operate effectively, 46% of audit committee members and 59% of financial statement users would like the audit profession to be more proactive in addressing evolving demands.
“Many investors are looking for broader and deeper insights that can help them make smarter, more informed decisions,” said Joe Ucuzoglu, chairman and CEO of Deloitte & Touche LLP, and leader of Deloitte’s audit practice. “The audit profession as a whole will be looked at to expand outside the domain of the historical financial statements.”
The “most important” business metrics should be incorporated into audits, Ucuzoglu said, such as key performance indicators, industry metrics, and non-GAAP measures.
In Deloitte’s survey, released Wednesday, virtually all of the respondents strongly agreed that more advanced technologies should be used in the execution of an audit. However, while 70% of audit committee members and financial statement preparers say that audit’s adoption of innovative technology and process improvements keeps pace with their industries, only 45% of financial statement users agreed.
“To deliver the most value, the audit profession must lead by taking deliberate steps to get in front of the challenges and bring audits into the future,” Ucuzoglu said. “This will require significant investments, and a mindset that is bolder than the public accounting profession has historically been known for.”