ICAEW.com works better with JavaScript enabled.

Weaving the audit fabric of the future

AuditFutures is capturing the passion and commitment of a diverse community and emerging as the voice of innovation in audit, as project lead Martin Martinoff explains.

Join the Audit and Assurance Faculty

Stay ahead of the rest with our comprehensive package of essential guidance and technical advice.

Join online now
There is a vacuum in public trust in the financial services industry, created by failing institutions and exacerbated by financial scandals. We often rush to fill such spaces with left–brain approaches that lead to bureaucracy, micromanagement and overregulation. What makes AuditFutures unique is that it takes a broader, systemic approach and looks at the opportunities for the audit profession to be part of the answer to the challenges ahead.

By taking a radical new approach, we have inspired not only people from the profession but also academics, think tanks, policymakers, standard-setters, investors, bankers, and leaders from civil society. By working together and using the proven facilitation methods of the Finance Innovation Lab, we have hosted numerous events that allow small groups of people to participate in discussions. By exploring new ways to innovate in audit we have understood that collaboration is needed in order to achieve significant goals.

Most importantly for our work, we have built collective intelligence around innovation in audit. The first assembly gave us insights into what is not working and what needs to change. It also highlighted some innovation domains for further exploration, in areas that range from new audit methods and reporting models, to changing the culture of audit and serving a wider stakeholder base. Conducting further in-depth interviews and consultations with stakeholders gave us an even greater understanding of their needs and the potential of this ambitious project.

A model for change

Distilling our ideas and thinking into something more concrete has enabled us to develop an understanding of the broader systemic areas where innovation is needed. Drawing from the analysis, a model was developed to illustrate where change needs to happen in audit.

This model organises our thinking on audit innovation into four subject areas: society, institutions, information and people. These are the main areas for systemic change in audit that we want to develop further, and the four pathways that we have to take collectively: they interconnect and interact with each other to create the spectrum of change for greater systemic impact.

Understanding the purpose of audit in our society is fundamental to the work of AuditFutures. We have to bridge the  existing expectation and perception gaps and also develop robust knowledge and relationships with all stakeholders. Key questions to consider are why society needs audit and what the dynamic role of audit is.

We must also identify the institutional changes that will enable audit to best serve the public interest. We have to re-evaluate the function and governance of the profession: the structure of firms, the policy process and the regulatory framework. How does this change our practices and institutional forms?

In a modern world of growing information disclosure and rapid technological innovation, the content and scope of audit must evolve. This will ensure the relevance of audit-for-business decisions in an environment of greater complexity and interconnectivity.

But the most significant driver for change is the people in the profession. Which competencies and skills in both recruitment and training does audit in the 21st century require? We must discover and illuminate the values and behaviours for new leadership and culture within the profession.

Taking joint initiatives

At the second AuditFutures assembly on 7 December, we took the next step and moved into more specific areas. Using an open-space process, where all participants sit in a circle, we asked people with ideas and suggestions to step forward and host a discussion. This method is not about perceived authority in solving problems; it is about us collectively stepping up to take responsibility. This is the shift in leadership style that we need.

Over 20 participants hosted working groups on specific ideas. Each group discussed the changes needed, the immediate next steps and the long-term impact that is desired. These are some of the initiatives that have emerged from the discussions:

  • Stakeholder mapping: it is often not clear who or what ‘society’ is and it will be helpful for businesses to have a more concrete concept of the people and organisations that they should be accountable to.
  • Working with internal audit: we need to establish how internal and external audit can work together with management to ensure corporate sustainability and success.
  • Reducing audit box-ticking and documentation: limit documentation to what is truly important by leading an international dialogue to reduce the length and complexity of auditing standards.
  • Asking society what it wants from audit: working in the best interests of society will help close the expectation gap. Auditors should do what is expected, rather than simply managing expectations.
  • Improving the public image of audit: what initiatives, if any, can and should be taken to change the public image of the audit and accounting professions?
  • Impact of social media on audit: how do social media, mobile and cloud technologies, and ‘big data’ impact on when, how and what we audit?
  • Audit competition: how do we stimulate healthy competition and innovation while at the same time increasing the collaboration between different audit firms?
  • Crowdsourcing audit: how could crowdsourcing contribute to the audit of a specific entity or sector?
  • Building trust in SMEs: how can we inspire and support ambitious SMEs in this economic climate?
  • Audit education: how do we bring auditor skills and competencies up to date?
  • Barriers to audit being ‘ideal’: is there something in the nature of our institutions that prevents audit from being ‘ideal’ and can this be changed? There is great value in audit and the profession needs to back itself more and not hide behind technical, legal or regulatory frameworks.
  • Real-world auditing: how do we widen our view of the business beyond what is written in financial documents? How do we move from numbers to words and provide forward-looking reviews of real-world experiences and behaviours that are drivers of future performance?
  • Audit that serves all: how do we integrate financial, social and environmental audits into one audit so we bring complex issues together into a single, simplified report?

Looking ahead

So, what’s next? We see AuditFutures working at three levels. The broader efforts are to communicate our work effectively and engage stakeholders dynamically. It is important to continue building our community and share our work with a wider international audience, and we are fostering collaborative relationships in practice and with regulators, standard-setters and civil society leaders.

In addition to maintaining momentum, we are working with innovation groups to develop their ideas. With regular workshops, coaching sessions and leadership retreats, we are developing projects with immediate and long-term impacts.

While AuditFutures is not a think tank, our initiative has attracted talent and expertise to develop strong thought leadership. This aspect of our work will be developed to amplify the good ideas and to strategically engage with regional and global stakeholders and policymakers.

Community feedback

“The important thing for me was ‘we are not alone’. People want to change and there are a lot of ideas out there.”

“It was really good to test my ideas with people who have very different sets of experiences.”

“It is great to have a big assembly, but we outlined some specifics and we are starting to move on projects for people to work on.”

“There is a way forward, you can see that there is a light at the end of tunnel. It is a long way off, but there is a light out there.”

Join AuditFutures

To join the conversation, contribute to the process and for complete updates on all working groups, please visit AuditFutures.org, email Martin Martinoff or phone +44 (0)20 7920 8896.

Martin Martinoff is project lead of AuditFutures in the technical strategy department of the ICAEW

This article first appeared in Audit & Beyond, magazine of the ICAEW Audit and Assurance Faculty, in March 2013.