Newsletter | Volume 1

Issue I
Issue II
Issue III
Issue IV
Issue V
Issue VI
Issue VII
Issue VIII
Issue IX
Issue X
Issue XI
Issue XII
Issue XIII
Issue XIV
Issue XV
Issue XVI
Issue XVII
Issue XIX
Issue XX
Issue XXI
Issue XXII
Issue XXIV
Issue XXV
Issue XXVI

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Updating the Auditor Independence and Audit Committee issues

After significant changes in 2002 post-Enron scandal, the rules governing the external auditor and therefore the audit committee are now fast evolving. The EU regulations that come into force in June 2016 aims to improve selection, competition, price and choice by changing the external auditor. The professional services firms are heavily investing in new intelligent technology and data analytics, to take care of routine audit chores. The merry-go-round of audits substitutions between the Big Four - PwC, Deloitte, EY and KPMG is rotating.

In 1896, Puccini's opera La bohème premiered in Turin, Queen Victoria surpassed her grandfather King George III as the UK's longest-reigning monarch and professional services firm PwC - then Cooper Brothers - began auditing Barclays. In 2014, PwC was still the auditor of Barclays, when the UK bank announced it was putting the contract out to tender for the first time in almost 120 years. The move was sparked by new European regulations designed to shake up the audit market in the wake of the financial crisis. PwC's relationship with Barclays is one of the bluntest examples of a tendency for companies to hang on to their auditors for decades.

Price Waterhouse (now PricewaterhouseCoopers) was first elected external auditor by the Annual General Meeting of Novo Industri A/S (now Novo Nordisk A/S) in April 1982. PWC has recently re-elected as the sole auditor of Novo Nordisk A/S once again.

Junior auditors replaced by robotics
Technology transformation and automation thru workflow automation, data analytics, data mining and artificial intelligence will change the administrative work performed during the annual audit by the external auditors forever. The UK Financial Reporting Council has therefore designed improvements in audit quality and innovation in the audit profession based on the introduction of the new technology.

The audit firms are also seeking to address the typically faster-growing and more lucrative consulting arms. Critics, however, claim that the shifting balance of advisory activities could threaten auditor quality and independence.

Converging the new world of IT transformation
Many argue that the current changes were long overdue due to the continued apprehensions caused by the credit and financial crisis initiated by the subprime issues and perhaps also due to the overloaded business models of many financial institutions and banks.

The globalisation and advances in technology have resulted in an explosion of data. Management of all companies is in the process of converting the new world of IT transformation and information into meaningful business intelligence for value, growth and stakeholder satisfaction.

While technology is driving change for the new business models, the innovative applications, artificial intelligence, and the use of machines to scan electronic documents that automatically identify and extract elaborate KPI's and critical accounting information will change the way the Audit committees perform their duties in the future.

Technical knowledge will become increasingly commoditised, and audit committee professionals will need to provide understanding to stay relevant. In future they need four dimensions of sight; hindsight, oversight, foresight and insight.

Participate in the Audit Committee events to gather an understanding of the new world of auditors and the audit committee.

Hans Henrik Aabenhus Berthing, CPA | CGEIT | CRISC | CISA | CIA, will explain the above issues so that the members of the audit Committee are well versed to address the new world of IT transformation to carry out their responsibilities.

1) Source; Financial Times
2) Source: