The audit—and auditor—of the future

It’s hard to believe that it’s been 20 years since the Sarbanes-Oxley Act (SOX) transformed the audit profession.[1]

I remember well what a watershed moment it was for all of us, still reeling from massive frauds at Enron and WorldCom, when SOX was signed into law. I also vividly recall the challenges presented to companies and auditors devoted to compliance efforts under SOX, and the level of our commitment as an entire profession to meeting the law’s standards and enhancing audit quality.

SOX changed the culture of the financial reporting ecosystem, and the numbers show the impact the legislation has had: Since financial restatements hit their peak in 2006 in the wake of SOX, they have declined by over 80%, to a record low in 2020.[2]

With SOX as the foundation, the profession continues to rise to the occasion, as we did during this pandemic. A recent survey of audit committee members about the first fully remote year of 2021 found that virtually all of them felt that there was no sacrifice in audit quality—and 32% thought audit quality actually increased under very trying conditions.[3]

This is pretty extraordinary. But when your work is so important to clients and the capital markets, resting on your laurels is not an option.

That is why we instill a continuous improvement mindset in our people at EY. This mindset drives our efforts to transform audit workstreams through simplification, centralization, and technology.

Simplification means streamlining our methodology, so our people can concentrate on the areas of highest risk that matter most to audit quality. With centralization, we are freeing our local core audit teams from performing administrative audit work and highly standardized audit tasks—while at the same time, creating shared resources where they can find focused expertise.

Our investments in technology mean that almost 100% of the U.S. public company audits that we perform now employ data analytics. As a result, our audits rely heavily on the analysis of full populations of company data, instead of traditional statistical sampling—enhancing risk assessments and allowing auditors a much deeper understanding of the companies they audit and their financial reporting processes.?

The advent of the digital audit is a sea change in the profession as great as SOX was 20 years ago.

It has not only enhanced audit quality—it has also created a much more exciting early career trajectory for young auditors. Armed with powerful analytic tools and a data-first mindset, team members at the staff and senior levels are acquiring important critical thinking skills. Confident in what they are seeing in the data, they are having higher level interactions with clients, so they are also developing executive skills much earlier.?

As EY audit teams compete for the best accounting talent—and work to make the profession more diverse, equitable and inclusive—we are removing the structural and financial barriers to entry that some young people may face. Our Service Delivery Center offers a new door into the profession for people with a diversity of skills and experiences, including candidates with associate’s degrees, who are upskilled by EY. With our Career Path Accelerator, we have created a cost-effective, high-quality pathway to CPA licensure for students who don’t have the time or the money to complete a master’s degree. ?

When we look at where the profession is going, resilience and agility are definitely required, now and in the future. Our people have spent the past two-plus years helping our clients address the upheaval of COVID-19, while adjusting to a new way of working. We also see no signs that the pace of technological change is going to stop, either for us or for our clients. And the Securities and Exchange Commission has been very active, proposing rules in recent months to enhance and standardize disclosures for special-purpose acquisition companies (SPACs), for cybersecurity risk governance, and for climate-related risks and greenhouse gas emissions.?

The remit of the assurance professional is likely to expand in the near future. Clearly, many investors and other stakeholders want environmental, social and governance (ESG) information that is reliable and that allows for comparisons between public companies. The auditor’s skill set remains as relevant and valuable as ever, by offering assurance on the measures that stakeholders throughout our economy find most meaningful to long-term value. And those are changing.

I cannot imagine a more exciting time to enter the audit profession, particularly for young people interested in the shifting business environment overall, with a readiness to question the status quo and improve every day. The profession has a lot to be proud of over the past two decades? but there is always the opportunity to turn the wrench and to get that much better. Audit quality demands it, and our people demand it.?

At the end of the day, they are inspired by the profession’s underlying mission. They are proud to serve the public interest, by creating trust and confidence in the capital markets.?Through so much change, this will continue to be our focus.

The views reflected in this article are those of the author and do not necessarily reflect the views of Ernst & Young LLP or other member firms of the global EY organization.

[1] “CORPORATE CONDUCT: THE PRESIDENT; Bush Signs Bill Aimed at Fraud In Corporations,” New York Times website, https://www.nytimes.com/2002/07/31/business/corporate-conduct-the-president-bush-signs-bill-aimed-at-fraud-in-corporations.html, accessed May 13, 2022.

[2] “2020 Financial Restatements Review,” Audit Analytics website, https://blog.auditanalytics.com/2020-financial-restatements-review/, accessed Mazy 13, 2022.

[3] “Demonstrating the Value of Public Company Auditors,” Center for Audit Control website, https://www.thecaq.org/2022-outlook/, accessed May 13, 2022.