Reinventing the Auditor

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The Auditor of Tomorrow the Case for New
Competencies and Broader Qualifications
Christopher LEACH
Senior Vice-President, CTO-Technology Risk
Management, Bank One Corporation United States
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The Auditor or Tomorrow

• The Case for New Competencies Broader
  Qualifications.

By Christopher J. Leach, CPA CTO, Bank One
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Accounting
In some ways accounting hasn't changed much since
Pacioli wrote the first "textbook" in 1494. On
the other hand, accounting has been a leader of
the Information Revolution. Many aspects of 21st
century accounting will be unrecognizable by
today's professional leaders. Understanding the
role of financial and managerial needs today and
in the future requires an understanding of the
past.
Luca Pacioli, Father of Accounting
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The Auditor - A Historic Prospective

• Reporting on financial results of an enterprise
  validating the results of operations

• Reporting on adequacy of internal controls

• Reporting on compliance to accounting standards
  (GAAP, GAAS)

• Reporting on compliance to 3rd party requirements
  (Regulatory, contractual)

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The Auditor - Yesterdays Tools of the Trade

• Calculators

• Columnar pads

• Integrity

• Objectivity

• Independence

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The Changing Environment of Todays Business
Environment

• Rapid globalization

• Global competition

• Business at the speed of thought

• Emerging technologies

• New threats to electronic business practices

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Todays Business Needs

• Knowledge in the area of the audit (i.e. IT,
  systems, networks, etc).

• Real time information real time audits

• Continual audits

• Business assessments beyond simply validating the
  numbers.

• Identification of new areas of revenue or areas
  that may present risk.

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Accounting an historical prospective
1494
1887 1890
1996- present
1984
1973
1938
1933 1934
1914
ICC Created Shermant Antitrust Act
Audits Required/SEC Created
Pacioli Writes Accounting theory
Assurance Service
FASB Created
Federal Reserve Created
AIA (AICPA) Issues 1st Standards
EITF/GASB Created
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New Attestation Services

• WebTrust

• SysTrust

SAS 70

• Other reports

Agreed upon procedures
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Todays Challenges

• New technology will not solve an old challenge
  determining which information meaningfully
  reflects the true state of the enterprise's
  health. In the long run, enterprises that can
  solve this challenge will win a competitive
  advantage. Better measurement will foster greater
  control and operational efficiency. In turn,
  achieving these gains will increase enterprises'
  access to capital.

Source Gartner Group August 2002
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Todays Challenges

• The auditing process presents one of the
  most-significant barriers to the rapid deployment
  of more-frequent and more-timely financial
  reporting. Most of the delay in releasing annual
  closing numbers to the market stems from the time
  needed to audit those numbers.

Source Gartner Group August 2002
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The New Audit Professional Services Firm

• The People
• Real time decision processes and tools
• Understanding of todays control environments
• Ability to calculate accruals and provisions in
  real time
• Methodology
• Market expertise and applicability
• Global view
• Operational view

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Re-engineering Needed

• Professional Standards changing

• Global impact and regulations

• Systems concepts understanding

• Business risk assessments

• Hardware operating systems proficiencies

• Software strengths/weaknesses

• Networks/Internet capabilities and limitations

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The Auditor - Todays Tools of the Trade

• Calculators

• Computers

• Telecommunication tools

• Integrity

• 3rd Party Data

• 3rd party experts

• Objectivity

• Software

• Independence

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Todays Challenges

• Keeping up with Change
• If we dont just ask him what may happen

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The Auditor or Tomorrow

• The Case for New Competencies Broader
  Qualifications.

By Christopher J. Leach, CPA CTO, Bank One