Audit & Accounting Alert Newsletter

Issue 5 |September 2017


At-A-Glance

Gerry Herter

In this issue, we look at the state of the audit profession through the eyes of clients, as well as how two international audit firms are addressing the need for changes in the audit process.

Our first article reports on results from Deloitte and KPMG client surveys. The clients find more value in their company audits than just the assurance and credibility that the audit opinion conveys. The fresh “eyes” of the auditors bring useful and innovative input for improving and enhancing company approaches. At the same time, clients anticipate and expect more future-looking and technologically advanced techniques from the auditors.

Businessman-Looking-into-the-Future-TelescopeOur second article describes the progressively sophisticated systems that Deloitte and KPMG are developing and employing to address, from an audit standpoint, the rapid growth and complexity of client processes. For smaller audit firms, the Rutgers AICPA Data Analytics Research Initiative (RADAR) seeks to provide similar tools designed for examinations of clients in this segment of the market.

Finally, our Worldwide Update covers news from organizations across the globe.


The Current & Future Value of the Audit

Surveys from Deloitte and KPMG weigh in

value

While constantly contending with the relentless pace of technological change facing the audit profession, value can be derived from pausing regularly to assess client perceptions of the current and future role of the professional auditor.

To put things in perspective, when I was acquiring my accounting education in the mid-1960’s, I accessed the university’s IBM 1401 computer system to process my programming assignments. I sat at a typewriter-like machine punching holes into cards that would form a deck that I fed into a card reader that in turn converted the strategically placed holes into electronic impulses processed by the computer. Now fast forward to 2011. According to an IBM publication issued for the company’s centennial that year, “the IBM 1401 computer weighed about five tons and had about 16 kilobytes of memory. By comparison, modern cell phones are about 10 million times faster.” And that was six years ago.

As the mind tries to grasp the full impact of that last statement, let’s turn to the more familiar domain of surveys and responses. In recent months, both KPMG and Deloitte have surveyed company executives and audit committee members for their insights from interacting with their company’s external auditor. The Deloitte survey focused more on current value from the audit, while KPMG asked mainly about future expectations.

More "Value of the Audit..."


Future Looking Audit Techniques Employed Today


A glimpse into modern audit technology

Future of Audit

As was alluded to in the above article, there has been and continues to be a geometric increase in the speed, capacity and pervasiveness of technology, accompanied by a corresponding reduction in complexity for the user. Mobility has been a force and benefactor in these trends, while security sophistication races to keep up. Most areas of our lives are impacted by these developments, and the audit profession is no exception. Since the assurance function is the one CPA-exclusive franchise, forward-looking diligence is a must in order for the profession to preserve the relevance of that distinction.

The multi-national accounting firms, with their wide array of resources, have been proactive in incorporating the new technologies into the audit process as they emerge. To gain insights into these innovative developments, let’s take a look at some of the applications Deloitte and KPMG have added to their set of auditing tools of the trade.

More "Future Looking Audit Techniques...."



Worldwide updateWorldwide Update

Periodic roundup of recent and
upcoming actions and activities
by Audit and Accounting
organizations throughout the world

IASB – International Accounting Standards Board (www.ifrs.org)

1. International Financial Reporting Interpretations Committee IFRIC 23: Uncertainty over Income Tax Treatments -
issued June 7, 2017,provides requirements that add to the requirements in IAS 12 Income Taxes by specifying how to reflect the effects of uncertainty in accounting for income taxes. The effective date is January 1, 2019.

IFAC
– International Federation of Accountants (www.ifac.org

1. Making Regulation Work,
Principles and Models for the Accountancy Profession, guidance issued on August 7, 2017, to assist accounting firms “in their efforts to adapt to recent regulatory evolution, and actively influence stakeholders and influencers.”

More "Worldwide Update...."


Additional A&A News


1. Four reasons why tech investment is critical for accountants

2. Lack of Accounting Guidance Stifles Blockchain Growth in U.S.

3. ACCA finds need for improved ethics in digital age

4. Lessons learned on the path toward revenue recognition implementation

5. FASB plans new expedient for lease accounting

6. Sustainability: How CPAs can be part of a global conversation

Audit & Accounting Alert is a publication of Integra International intended to highlight emerging issues in the profession. The goal is to give Integra members an awareness of developments impacting the practice of Audit & Accounting enabling them to stay on the forefront of industry trends.

Editor Gerald E. Herter ~ HMWC CPAs & Business Advisors, 17501 E. 17th Street, Suite 100, Tustin CA
email: gerry.herter@integra-international.net