The audit field is rapidly evolving. Changes such as the emergence of continuous auditing, data analytics, Big Data, and integration of information technology require auditors to have new approaches and to become proficient in information technologies and analytical methods.
“In the past, businesses were run from the financial statements,” said Miklos A. Vasarhelyi, Ph.D., professor of accounting and director of the Continuous Auditing & Reporting Laboratory at Rutgers University. “Today, businesses are run differently, based on hundreds of linked transactions happening at once.” As a result, the role of the auditor is shifting: auditors are now able to identify and verify larger amounts of data than they once were and perform audits on a continuous basis as opposed to a periodic one.
These changes to the audit field have many educators wondering whether, and to what degree, it makes sense to teach advanced auditing and IT-based auditing to undergraduates. Though more employers are now using continuous auditing and data analytics in audit, faculty question whether the subject is too advanced for undergraduates. They also worry about having the time to fit more material into an already full audit curriculum.
What should accounting programs be doing to prepare students for changes in the auditing field? Three prominent faculty members in the world of advanced audit weigh in.
What employers require
Changes in client technology, increased regulatory scrutiny, and the limited time frame auditors now have to sign off have put pressure on firms to be more efficient. That’s why many public accounting firms now use some form of continuous auditing. Many CPA firms are training their professionals on advanced auditing techniques, and the largest firms have invested a significant amount of training time and money in this area.
The use of data analytics in audits is still in its early stages, said Helen Brown-Liburd, CPA, Ph.D., associate professor of accounting and information systems at Rutgers. However, she believes that, in the near future, firms will need to incorporate more technology and the use of data analytics to maintain audit quality. “With Big Data, it’s not efficient to audit using old audit approaches anymore,” she said.
But what does this mean for accounting graduates? Ryan A. Teeter, Ph.D., clinical assistant professor of accounting at the University of Pittsburgh, noted that accounting graduates may not always be the ones hired to perform data analysis. Large CPA firms are more likely to recruit freshmen and sophomores from STEM majors for that role, he said, “to become their in-house data scientists and assist accountants and advisers out in the field.”
What firms need from auditors is the ability to understand both accounting and technical concepts, Teeter said. “Big Four firms have three types of roles: accountants/auditors working with clients, data scientists with specialized skills to analyze and manipulate data and look for correlations, and intermediaries/translators between the other two with both an accounting and IT background,” he said. “Our focus should be on the third category.”
IT knowledge may be especially important to students who seek careers in business and industry, Brown-Liburd and Teeter both said. Internal auditors, Brown-Liburd said, are not bound by external auditing standards and can therefore be more progressive in using advanced auditing techniques.
What do undergrads need to know?
Accounting curricula have yet to catch up with changes in the audit field. “Although there is an awareness that something has to change, no one is exactly sure how to do it,” Teeter said.
The extent to which universities have begun to teach advanced auditing methods varies. For example, at Teeter’s employer, the core accounting degree program includes a course in accounting information systems. But, like most universities, it does not offer an advanced course.
Part of the reason curricula have yet to change is that IT in audit is still so new. In Vasarhelyi’s experience, educators have not yet learned enough about the new audit trends to make curricula changes.
Course materials for teaching this subject matter also have yet to be developed. Brown-Liburd noted that “the textbooks are slow to develop integrative audit projects and interesting case studies that students can work on using the tools.” She uses case studies to get her students comfortable with the use of advanced audit software (ACL, Idea) and how to extract data from simulated client databases to use as audit evidence.
Then there’s the fact that faculty already have so much content to teach. “The university, in theory, is where these ideas and philosophies could start,” said Teeter. “But the challenge is that the undergraduate program must cover all the [traditional] areas so that students are reasonably well-prepared for work at an accounting firm.”
In fact, though having some knowledge of data analytics and continuous auditing would be helpful to undergraduates, advanced auditing may be a subject better suited to graduate study. In Vasarhelyi’s opinion, the current CPA exam content is good for what accountants need for their first two years of work. But he recommended that staff continue to acquire long-term learning in areas such as information technology, analytical methods, and expert systems, as they become managers and partners.
Helping audit students become conversant with IT
What, then, should undergraduates be learning about IT? Brown-Liburd tells her students that, at a minimum, they should take IT electives and advanced accounting information systems courses that expose them to advanced technology. She also encourages them to minor in IT, as she believes it is very important for students to understand general and application controls in an IT environment. (Certain courses, though, such as audit analytics or machine learning, may be available only at the graduate level.)
Teeter uses his undergraduate accounting information systems course to expose students to a number of tools they may use later. For example, he said, his students “develop flowcharts using Lucidchart, create financial statements using queries in Access and PivotTables in Excel, compute financial ratios using XBRLAnalyst, perform comparative financial statement analysis using Contexxia, complete a simulation of a company’s operating cycle in SAP, and analyze transactions and controls for anomalies using IDEA.”
Where to learn about new trends in audit
- Rutgers Business School (RBS) offers an annual symposium on continuous auditing and reporting to bring together academics and practitioners to discuss research and practice in application of technology to auditing and reporting.
- RBS will be sponsoring a one-day conference on Sept. 30 titled “Auditing in a Digital Economy,” which will focus on how more advanced technology can be adapted in the audit environment.
- The book Audit Analytics and Continuous Audit: Looking Towards the Future (popularly called the Pink Book), an AICPA publication, is a compendium of essays on audit analytics.
- The American Accounting Association offers the “Accounting IS Big Data” conference, as well as seminars and webinars on topics such as the audit implications of Big Data.