Are we ready to move forward if we will never return to the way things have always been done?

Audit – It Has Changed, Is It Broken?

Over the last year, both the American Institute of Certified Public Accountants (AICPA) and the International Auditing and Assurance Standards Board (IAASB) have continued to examine, and act on, the rules they promulgated in light of the increasing reliance upon and evolution of technology. Both bodies have expressed belief that the underlying principles are sound, but application guidance for technology needs to be considered.

The AICPA issued an exposure draft for comments to update Audit Evidence last June. The draft included mention of Blockchain, artificial intelligence (AI and real-time monitoring. The document also referenced the IAASB’s request for feedback on the growing use of technology in the audit, and the feedback received that “The International Standards on Auditing (ISAs) are not “broken” and should remain principles based but need to reflect the digital era in application guidance.”

The IAASB has itself been publishing a variety of news items, documents and drafts relevant to the topic. The revised ISA 315 from October explicitly notes that tech was an important consideration. They noted that “The increasing use of automated tools and techniques by auditors when performing risk assessment procedures necessitated changes within ED-315 to recognize the usage of such tools and techniques explicitly.”

This is a start; is it enough?

We have seen a world turn to technology over the last few months, and the chosen vessels have been stretched and strained under the “temporary” transition. In particular, the security aspects were tested and found wanting.  As accountants have moved from the office (or the client) to the home, we have only begun to see the challenges to security and privacy, let alone the stresses brought on by doing business differently and virtually.

Government and Virtual Activities

For example, the pandemic has brought on changes in government function that prior events were not able to change.

Canada’s Parliament had its first virtual replacement for a sitting of the House in late April. 

I’m a bit more familiar with the US government; In the US, the buildings in which Congresspeople congregate have a system of lights and bells and buzzers to get people to the floor for attendance and votes. Now the House has voted to allow lawmakers to work from afar; this fundamentally changes how Congress operates. Remote voting and virtual hearings fundamentally change rules in place for 231 years, untethering Congress from the mandate to come together “physically”.

British Parliament has been conducting hybrid proceedings – no more than 50 members physically present, with the rest participating via video conference.

Virtual government has been called stilted and scripted; available time to debate legislation is cut by 2/3; civility is in, but getting stuff done (the way it has been done, whether you think that is good or bad) is largely out. We all know about technical glitches and the impact on efficiency.

What Will Give?

Physical presence: our social separation has hit this topic more than most. if it must be minimized, there are methods to compensate for the loss. My observation is that the methods chosen for the last few months may have been necessary but are not ideal and not sustainable. However, it is these methods that 20 years of continuous monitoring, auditing and reporting methodology has asked us to  work through. Perhaps this is the time.