The Future of Audit Quality: How Auditors Are Ensuring Accuracy

High-quality audits are important because they provide credibility to financial statements. This in turn allows shareholders to feel trusting and confident in their accounts.

As the U.S. recovers from the pandemic, it’s becoming increasingly important to conduct high-quality audits to ensure trustworthy financial reporting. Here’s a glimpse into the future of audit quality according to audit professionals, according to a recent panel with the U.S. Chamber of Commerce.

The U.S. Must Build Trust and Confidence in Financial Reporting Through Thorough Audits

Those involved in specific financial accounts, like investors and shareholders, want to feel like they can trust the accuracy of their financial reporting — making audits exceptionally important.

“The United States has the largest, most liquid, and transparent capital markets in the world, which offer investors of all types the opportunity to provide for their families, to save for college, to secure their retirement, and to build toward their aspirations,” said Kelly Grier, U.S. chair, managing partner, and Americas managing partner at EY. “High-quality independent audits are the bedrock of those markets. So as the world works to stabilize and recover from the pandemic and the economic fallout associated with it, we have an incredibly important role to play in building trust and confidence in financial reporting.”

Grier said we will achieve this by leading with purpose, accelerating the digital transformation across every industry, investing in our people, including their existing skills and further learning, and paving the way for the next generation.

“We owe it to each other and to our stakeholders to do whatever it takes to re-imagine the path forward to sustainable audit quality built on a strong foundation of independence and objectivity,” she said.

“Simply put, you don't earn trust by telling people you're trustworthy,” Grier continued. “You earn it by proving it every day.”

Investing in the Right Technology Is Crucial to Performing Proper Audits

Without the right technology, financial professionals cannot get their jobs done as efficiently or effectively — which can cause major issues in auditing quality and accuracy.

“Technology is an enabler to really accumulate information and get it into the financial accounting system,” said Wes Bricker, vice chair and U.S. trust solutions co-leader at PwC. “It enabled us to step forward with much better reporting for lease obligations.”

However, it’s just as important to have the right technology to audit the financial information. Auditors need the proper technology to test the trails of transactions and identify items of relevant interest.

“We invest heavily in technology so that we're able to test what management is doing in their core systems,” Bricker continued. “Machine learning is one example — scanning contracts, understanding the key terms within those contracts, how it lines up with the accounting literature as we're evaluating, and adding confidence to the reporting within financial statements and those disclosures.”

The Pandemic Has Brought Countless Challenges to Maintaining Audit Quality

Like in many industries, the COVID-19 pandemic caused countless obstacles for auditors trying to maintain quality and accuracy, like adjusting to a hybrid work model.

“It raises issues for integrating new staff into an engagement team, training, and I think it's putting more burden on audit managers,” said Dan Goelzer, founding member of the Public Company Accounting Oversight Board (PCAOB). “The profession, I think, has adjusted well to the remote working environment, but it does pose challenges that I think are still being worked out.”

Some challenges, in particular, include inventory observation, client systems moving to a remote model, and the “great resignation.”

“There has been turnover in the profession,” added. “Generally across the business community, people are reconsidering their career options, and the talent pipeline coming into auditing isn’t as broad as what we need. … That constellation of things are all important series of the challenges.”