ThinkTWENTY20

Auditing standards urgently need to change in two respects. First, they should reflect that the vast majority of entities being audited already make significant use of technology in their operations and in preparing financial statements. Such use will continue to grow rapidly and become more complex. Second, the standards need to be revised to strongly promote – and perhaps require – the use of automated audit procedures, including data analytics. Despite leaders of the accounting profession calling for action now, however, auditors in general do not appear to share this sense of urgency. They may express agreement with the concept of a need for change in the near term, but resist any significant revisions of standards that would make such changes a reality. For example, in 2016, the IAASB Issued a Request for Input (RFI) on the growing use of technology in audits, especially data analytics. IAASB’s Feedback Statement on this RFI states that “most respondents believe that the principles in the extant ISAs are still appropriate and accommodate the use of data analytics, and caution against prematurely rushing to change requirements in the standards.” 

This is an excerpt from an article by Gregory Shields that appeared in the Summer 2019 issue of ThinkTWENTY20. A free copy can be obtained here. For a free subscription to ThinkTWENTY20, click here.

Neil Harbisson calls himself a cyborg. Without the antenna implanted in his skull, he would not be able to see colour of any kind. Born with achromatopsia, a condition of total colour blindness that affects 1 in every 30 000 people, Harbisson’s physical faculties are augmented by cyber technology to grant him access to a life of greater meaning and satisfaction.

As technological evolution leads to concomitant advances in medical science, we are seeing more and more examples of humans who are integrating devices and sensors into their biological makeup.

For some, like those part of the growing “transhumanist” movement, this is a means of artistic expression or exploration of human potential. For others, it is a solution to a medical problem. Either way, it represents the most vivid and personal example of what may be called a cyber-physical system (CPS). 

Harbisson campaigns for greater debate around the identity and rights of people with tech-adapted bodies. As in any discussion of CPSs, however, a more urgent part of the conversation should be security.

In March 2019, an alert from the US Department of Homeland Security and the FDA warned medical professionals and patients that a broad range of implanted devices, such as defibrillators and heart monitors, were vulnerable to hacking that could cause product malfunction.

Hackers had proven these concerns before, but the DHS announcement was chilling confirmation of the threats to human life that accompany the convergence of the cyber and the physical. 

This article appeared in the Summer Issue of ThinkTWENTY20. For the complete issue, click here.

SBR (Standard Business Reporting) is a strategy concept that at its root is very simple. It involves eliminating duplication in reporting. Governments have been finding it very useful for reducing costs, both for themselves and for the organizations that report to them.

Essentially, SBR involves identifying all duplication in reporting requirements, standardizing those requirements and then eliminating the duplication. For example, a national government normally has agencies to collect income tax information, statistical information and, in many cases, regulatory information.

Each of these agencies will usually collect information like sales, payroll expense, net income, etc. That means the filers must submit the same information to each of the agencies. Each filing costs them money. If the duplication were eliminated, their filing costs could be reduced substantially. If you think about it, there are many different kinds of information collected, and duplication in many of them. So the savings can be very large.

Of course, the items being collected by different agencies might be defined differently, so the duplication may not be exact in some cases. For example, net income for tax purposes maybe different than net income for statistical purposes. This is where standardization comes in. The definitions can be standardized so that elimination of duplication is possible. Sometimes this is straightforward; other times, it cannot be done, whether because of legislative constraints, or administrative constraints in one or more of the agencies. But often it can be accomplished, perhaps by identifying common elements to those items, as long as the standardization is diligently pursued.

Once standardization is accomplished to a satisfactory degree, the items of information can be collected by a data collection agency, working in cooperation with the agencies involved, so that the data only needs to be collected once, thus achieving the objective of making life simpler and less expensive for the filers and cutting red tape.

Numerous governments around the world have been implementing SBR. The most notable are Australia and The Netherlands, both of whom have achieved considerable savings. New Zealand has implemented SBR and most recently, the State of Indiana reported beginning an SBR effort. Other governments have conducted exploratory or preliminary work, including Denmark, Sweden, Finland, Turkey and Poland, among others.

The starting point for implementing SBR is to identify the information items being collected by a government and then exploring the ability to standardize and eliminate the duplication. This is the core of the effort and is a big job. Then a technology needs to be selected that is good for transmitting information among different platforms and computer systems. XBRL (extensible business reporting language) is most often used for this purpose, but there are alternatives, including XML, JSON, even Excel. This is a significant decision that needs to take into account the advantages and disadvantages of each technology. There are advantages and disadvantages of each. 

SBR is an ongoing significant activity, but the benefits are likely to exceed the costs. It makes a lot of sense. More information is available from the SBR websites of Australia and The Netherlands.