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
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: http://www.novonordisk.com/about-novo-nordisk/corporate-governance/audit.html