At-A-Glance

Our Worldwide Update is again split into two sections. The first covers COVID-19 news from organizations across the globe, while the second covers other news.  

Following the Pursuit of Audit and Accounting Excellence

A decade in the journey toward ever improving quality

The year 2012 opened following global financial turmoil in 2011 and with the accounting profession responding to accounting scandals and audit failures exposed by the 2008 financial crisis. Not surprisingly, the inaugural February 2012 issue of the Audit & Accounting Alert featured proposals from four organizations directed toward improving internal controls and tightening audit procedures.

COSO (Committee on Sponsoring Organizations of the Treadway Commission), an American private sector group providing leadership and guidance to help organizations reduce fraud and operate more efficiently, announced an update to Internal Control – Integrated Framework, which had been initially issued twenty years earlier. IFAC (International Federation of Accountants), the global organization for the accountancy profession, whose membership consists of the national accounting bodies from countries throughout the world, offered for consideration, Evaluating and Improving Internal Control in Organizations, a guide of good practices. The European Commission proposed legislation to improve audit quality by strengthening independence between auditor and client, fostering competition among auditors, and promoting better regulatory oversight of audit firms. Finally, American regulator, PCAOB (Public Company Accounting Oversight Board), issued Concept Release on Auditor Independence and Audit Firm Rotation, to address continued significant deficiencies in audit performance.

The topics in that first edition were precursors for the ten years that followed. Internal accounting controls, fraud, and audit quality and reform have provided sources of coverage in every year. Other topics that have appeared every year include financial reporting standards, sustainability, and technology.

In the financial reporting standards arena, the IASB (International Accounting Standards Board), and FASB (Financial Accounting Standards Board), have been the primary focus, as well as IFAC’s IAASB (International Auditing and Assurance Standards Board), to a lesser degree. The earlier years followed the progression toward worldwide convergence to IFRS (International Financial Reporting Standards). Along with developments in areas such as goodwill, going concern, non-profits, and standards for SME’s, small and medium entities, the Alert has followed the development of Lease Accounting and Revenue Recognition from the discussion stages, through exposure drafts, pronouncements, revisions, and implementation matters.

The potential and risks associated with technology advances offered by applications of cloud computing and big data were spotlighted in 2012. COSO released Enterprise Risk Management for Cloud Computing. eXtensible Business Reporting Language (XBRL), Audit Data Standards (ADS), and Continuous Auditing/Continuous Monitoring (CA/CM) were at various stages of development. While cybersecurity has been a focus all along, blockchain, bitcoin and the internet of things (IOT), captured attention midway through the decade. In recent years, increasingly sophisticated applications of artificial intelligence for audit and accounting have been introduced, as well as reporting for tax and accounting aspects of non-fungible tokens (NFT), unique blockchain-based representations of digital assets.

With regards to sustainability, as noted in our September 2012 issue, AICPA President Barry Melancon was already predicting that accountants would be working on integrated reporting within the following several years. Integrated reporting was intended to bring together material information about an organization’s strategy, governance, performance and prospects in a way that reflects the commercial, social and environmental context within which it operates. Its goal was to provide a clear and concise representation of how an organization demonstrated stewardship and how it created and sustained value, then and in the future. The then newly formed IIRC (International Integrated Reporting Council) proposed an initial integrated framework in July 2012. Fast forward to the present, Melancon recently announced support for the latest iteration of boards, the International Sustainability Standards Board (ISSB), which is “designed to develop a comprehensive global baseline of high-quality sustainability disclosure standards to meet investors’ information needs.” These standards fall under the general area known as ESG, which covers environmental, social and governmental issues.. More about this development will be covered in a future issue of the A & A Report.

Looking ahead, what might the next decade bring for the accounting profession in the financial reporting and auditing domain? One thing that unfortunately is likely to remain is the element of fraud and deception. While new tools may eliminate current nefarious techniques, the dark side of human nature has shown a determination to devise new ways to take advantage of opportunities to defraud. On the positive side, advances should continue to eliminate the need to pursue mundane, routine tasks, allowing even greater use of the boundless power of the human mind.

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