Working models brought about by COVID-19 have hastened the move to a more flexible, technologically aware and diverse auditing profession.
In brief
- Audit firms are likely to move to a more flexible working model based on the needs of the individual, audit firm and audited company.
- As businesses become more complex, audit firms will need to access a wide range of knowledge resources as part of their multidisciplinary model.
- Audit teams will become more diverse, with greater technical and business knowledge.
The way that audit professionals work has recently undergone the biggest and fastest change that any of us have experienced in our working lives. COVID-19 has accelerated audit firms’ transition toward new ways of operating that will outlast the immediate effects of the pandemic.
The sudden shift to remote and flexible working by both audit firms and the companies they audit adds a new dimension to the challenge already faced in adapting the audit to a fast-evolving corporate world. Companies’ business models are growing more complex as they move through digital transformation, and this is placing new demands on audit professionals. However, new ways of working will bring important benefits as well as posing challenges that have to be addressed.
As digital technologies and data analysis become increasingly central to the audit process – as well as to companies’ business models – audit firms will require a more diverse range of skills. They have traditionally recruited people with business backgrounds but, in the future, all auditors will need an increased level of technological understanding.
In addition, audit firms will require more people with significant expertise in STEM subjects (science, technology, engineering and mathematics) to enable them to leverage technology effectively for audit purposes. Not all these specialists will become qualified auditors, but some undoubtedly will, and their arrival will increase the diversity of audit teams.
The multidisciplinary model
The personal characteristics audit firms look for in new team members will evolve as well. Traditionally, firms have emphasized personal integrity and professional skepticism in audit professionals, and these attributes will undoubtedly remain vital. But in the new and fast-developing environment, auditors will also need to develop even deeper knowledge of business, a powerful curiosity about technologies and an agile mindset that embraces disruption.
One of the key strengths of audit firms as they address this changing landscape is their direct access to technical expertise across all areas of business, through the multidisciplinary model. This connection to the knowledge resources of a broader firm, from highly technical hedge accounting to valuation, cybersecurity, fraud, sustainability, tax and corporate finance expertise, is an enormous asset in providing high-quality audit services.
As businesses grow more complex, the ability to leverage that wider specialist expertise will become even more important.
Flexible working
The shift in people’s working lives has been extraordinary. However, the reaction to the COVID-19 pandemic has demonstrated that, when the situation demands it, audit firms are capable of rapidly making significant changes to the way they operate.
This experience has brought important benefits, especially because it has made flexible working a reality for more auditors. Flexible, remote working has become the norm for audit professionals, who have adapted successfully to using digital technology to work from home and have supported each other virtually so that their teams operate effectively.
Increased flexibility will bring other important benefits, especially if it results in firms placing more emphasis on performance in terms of output and productivity. More broadly, the changes brought about by COVID-19 will help to accelerate cultural change in organizations and make them more open to different ways of working.
However, the rapid switch to flexible working has also produced challenges that audit firms must address. There are practical issues, such as audit teams having to conduct discussions via online “chats” or virtual meetings, but there are also behavioral issues to consider. These include: the difficulty of conducting sensitive conversations remotely; helping new colleagues to understand the organization’s culture; providing coaching for junior staff; and meeting the expectations of audited companies about on-site attendance.
Ultimately, firms will address these and other issues by moving to a hybrid working model based on the needs of the audited company, the audit firm and the individual. This will involve a significant proportion of flexible and remote working, alongside periods when teams come together; for example, to receive training, to increase team cohesion or to meet company management on-site to gather audit evidence and build trusting professional relationships.
Fostering diversity
An increase in remote working only increases the importance of building strong audit teams. Not only do audit teams need people with a wider range of technical and personal skills, but they also need to include a more diverse set of experiences and viewpoints.
This means recruiting people from a wider range of social and cultural backgrounds and, once they are hired, giving them opportunities to broaden their personal horizons. For example, working on large international accounts provides exposure to different cultures. International mobility is important here too, although this has been restricted more recently because of the pandemic. At the EY organization, it is certainly something that we intend to return to as soon as possible.
But firms will succeed in fostering diversity only if they also create an environment where all their people feel they belong and are welcomed. Everyone must be able to thrive, contribute and add value.
Greater diversity in audit teams will naturally demand a matching response from their organizations, particularly in terms of career progression. They will need to create a more varied, flexible, agile set of career paths for audit professionals to accommodate the differing interests and aspirations of their people. The linear, hierarchical career progression that was traditionally favored does not suit everyone, and those who do not want to take this path must be offered other routes to success.
Staff promotions must focus on people’s skills, not the number of years they have spent with the firm. For example, the EY organization is introducing more ‘agile promotions’, where career progression takes place when an individual is ready rather than at set times in the year.
Supporting a more diverse workforce that must operate in a fast-changing business environment will require continuous training. But, in common with new ways of working, that training will also have to adopt a hybrid model. During COVID-19, the EY organization has shifted to an entirely virtual training set-up, but as part of the move to a new, long-term operating model, training will combine virtual and classroom-based delivery.
A sense of purpose
The way auditors work is in transition. Some of their work will be carried out remotely, and digital tools and data will play an increasing role in the audit of the future.
This process will inevitably be challenging for some people, while others will welcome it unreservedly. But if audit firms can navigate this transition effectively, there is every chance that audit professionals will flourish in the new environment and find that digital transformation makes their work more meaningful and brings them an increased sense of professional purpose.
There is a great opportunity in the current working environment to create a more effective, more purposeful profession that better serves the public interest.
The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.
Summary
The shift to remote working during the COVID-19 pandemic has accelerated a trend that was already in place in the auditing profession. Audit firms are now expected to move to more flexible ways of working based on the requirements of the audited company, the firm and the individual. The new environment has also highlighted the need for auditors to leverage available technology, have an agile mindset that embraces change and disruption, and to operate effectively in teams.
(Courtesy EY)
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