PCAOB Member Fears Big Data May Threaten Audit Quality

A PCAOB member has posed this question: Does the emphasis on data analytics by accounting firms mean that audits themselves are suffering?

Regulators are worried about just that, says the PCAOB’s Lewis Ferguson, since revenues from traditional audits are dropping and firms are building up their consulting businesses, CFO magazine reported. In a recent press conference, Ferguson said the changing business models of the top six global firms are “a source of great concern to regulators around the world.” Ferguson chairs the International Forum of Independent Audit Regulators.

The issue, Ferguson says, is that data analytics are becoming a bigger part of global accounting firms, so auditors need to learn new skills that “are not in the natural skill set of the auditor,” CFO reported. He told the magazine that accounting firms make “a cogent argument” that to attract analysts with data skills, they must boost the services sides of their businesses.

New data analytics experts have a different point of view than that of traditional accountants, Ferguson says. “Instead of doing testing by sampling, you look at the entire general ledger, at every transaction a company has done, and analyze those by exceptions and by outliers.”