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News that Grant Thornton has been fined by the Financial Reporting Board for “serious lack of competence” in his audits should remind us of several audit failures at other businesses and the issues across the industry. The fine imposed in this case is a logical step forward as the UK addresses historic breaches and revises its corporate governance and audit oversight (“Grant Thornton paid a £ 2.3m fine for Patisserie Valerie -audits “, September 28).
It is an important step forward to hold auditing firms and individual directors accountable, but we must also encourage auditors and regulators worldwide to reconsider the purpose and scope of auditing within the context of greater data and technology availability.
Nothing less than a complete transformation of accounting firms’ business models is needed to become purposeful. The future of accounting and auditing is no longer about transactions with numbers, but about the good judgment that can only be made from better quality data.
We need to see a stronger drive for innovation and the rapid implementation of technology in all businesses, regardless of size. Unfortunately, this is not happening fast enough, and in many cases it is not happening at all due to cultural and structural issues in the industry.
The audit industry is approaching a period of intense and far-reaching transformation, driven by digitization, new regulations, innovation and intelligent use of data. Businesses can not just throw more and more people at the problem as they have tried to do in the past, with predictable consequences for their profitability and quality. The solution to the problems associated with the audit must therefore be in part to use technology to implement a risk-based approach as standard.
In the next 12 months, the use of artificial intelligence will increase to remove and reduce fraud. Intelligent tools like these create the context and visibility needed to help businesses ensure that audits cannot fail.
Technology is no panacea, but audit firms will never succeed in solving the problems unless they use technology to detect fraud and errors and to prevent further scandals from harming the sector’s reputation.
CEO, engine B,
London N1, UK