What if…? Audit and the future(s)
A few days ago, I heard the following radio ad: ‘Contact us so we can solve your problems through our audit intelligence robot.’ It turns out that audit firms in the private sector now use audit robots to examine process and transaction flows, including auto-learning capacities. I knew this was happening, but what surprised me from the radio ad was how mainstreamed it already is for audit firms. Audit work being done by robots is a scenario three colleagues and I identified about three years ago, based on the feedback we received through an internal survey we had organised about imagining the future of the ECA in 2040. The big difference is that most respondents thought it would happen in a decade or so. As technology moves on, can people keep up? Or better, can we stay ahead?
Auditors are specialised in looking at facts, which many of us relate to the past tense. In doing so, auditors- and certainly auditors in the public sector — try to contribute usefully to future decisions, both for accountability reasons and for the sake of a learning government. As important as facts from the past are, so are changes in the future, whether presented as risks or as opportunities. As hypothetical these changes may be, being prepared to cope with them as individual, company, government or society will make you better off. Not being prepared will quickly push you into crisis management. While the essence of politics is to imagine what the desired future might be, the underlying thought is that we can create our future instead of being subject to it.
Foresight — exploring information on possible developments and their potential impact — is not as far away from audit as people may think. In financial audit, some form of foresight is embedded in the accruals accounting system. Future liabilities and returns need to be accounted for, and it is the auditor’s role to examine how well this is done. In a rapidly changing environment, insights into future scenarios that quickly change these liabilities become more and more important. Audit firms approving the accounts of companies which go bust a month later may otherwise face liabilities themselves.
Performance audits often look at future risks, such as the sustainability of the programmes implemented or envisaged, and their impact, whether realised or foreseen. This provides insights which can easily be related to foresight, as for example can be seen in the challenges the ECA formulated in its landscape review on climate change. How quickly these challenges become real, and even may turn into concrete liabilities, is shown by a recent court ruling holding government accountable for not acting on foreseen climate changes. Foresight, in this case with climate change scenarios involving impact predictions and possible remedies, becomes a more and more powerful tool. Otherwise even financial liabilities might be looming, to be reflected in…the accrual-based accounts.
Within the ECA, the discussion about the relationship between audit and foresight, and how better to link the two, is ongoing. It was the main topic of the annual seminar of the ECA leadership last September. In view of this discussion, we have made foresight the main theme of this Journal, to provide more information about foresight as expertise and to show the possible links between audit and foresight. We have a range of articles providing insight on what other organisations, be it EU institutions or international organisations, do to be more future proof. We look at what foresight entails for auditors in the private sector and other supreme audit institutions and we conclude with some perspectives on what foresight can imply for the ECA.
There seems little doubt that technology will change the way we conduct our audits in the future. One only has to look back twenty or even ten years to realise that. And the expectation is that the digital transformation will only speed up this process. Will the ECA be a leader in using this technology? Even more interesting is the question how this transformation will affect the activities of the ECA. How will the ECA remain relevant and provide the best possible information — be it based on hindsight, insight or foresight? How will public auditors help policy makers and decision makers to steer the future, instead of reacting to it?
This article was first published on the October 2018 of the ECA Journal. The contents of the interviews and the articles are the sole responsibility of the interviewees and authors and do not necessarily reflect the opinion of the European Court of Auditors.
